A $50,000 Concessional Contribution Cap

No, all good, I found the answer though Division 293 tax - information for individuals


Excess concessional contributions are taxed in other ways so you are no longer receiving a concession for them. In these circumstances, applying the additional 15% Division 293 tax to those contributions would not be fair.

As a result, Division 293 super contributions are generally equal to concessional contributions minus excess concessional contributions.


basically just saying div293 only applies to 25k of CC not ECC which is treated separately. He mentions it in his super max strategy video but confuses things by misspeaking 25% for 25K

 

Anyway back to the original post, what would be the advantage/reasons why the couple would make CC vs NCC in this scenario?

 

Because they wish to transfer more than $250K pa and typically cant use the bring fwd rule either. Perhaps even over several concurrent years. Thats pretty normal.

Many people realise too late that they hold too many assets outside super and then recognise that tax free earnings (or positive untaxed earning net of franking refunds) are very attractive. I often have people say - But its just $25K.

Yes $25K. each, And with non-concessional caps its now $300K....Repeat for three years. And you now have shifted $150K more than the caps permit into super with no apparent penalty. The true comparison is what the tax may be if the wealth is retained and taxed in personal names v'tax free (with franking refunds?) in super.

The typical limit is also resi property.Unless its sold and proceeds contributed. One aligned strategy is the downsizer concession if available. This sits outside the conc and non-conc caps.

 

Fair enough. I suppose it justifies fees for people that can't do their own planning.

 

Thanks for your information, Paul.

can i clarify a couple of things:

- 1, my question in relation to : defined benefit fund members the notional contribution amount each year.
* how do i know whether my total contribution is less than $1.6 million or more than $1.6 million?
- 2. My question about the amount a taxpayer personally claims as a tax deduction. does this affect the limit of $1.6 million?

Thanks in advance

 

If you are working then the fund can advise notional contributions to a DB fund.

SIS Regs dont allow contributions to a pension. But allow a contribution to an accumulation account which can later become a pension subject to the $1.6m cap limit. You can retire with a notional balance eg of $1.8m but the fund would be obliged to limit the pension to $1.6m and the other $200K may be a taxed accumulation balance There may be strategies around withdrawal of this FIRST. You can contribute as much as you like provided you dont breach the annual caps. I would seek personal financial advice to avoid errors and excess contributions penalties.

 

Hi Paul.

If the excess CCs remain in superannuation then they are treated as NCCs right?

In the example above, if each person contributes $150k and then claims a deduction for $50k each, the excess $25k would be treated as an NCC resulting in $125k NCCs each.

They would then either need to use the bring-forward rule or would have an excess NCC issue if they don't have access to the bring-forward rule.

Thanks

 

You will also have to include the contributions from your employer to the concession contribution, unless you are self employed and paying yourself super.

 

Yes if they are excess contributions. The ATO release authority and determination letters will outline the options. And if that is the case a person who may have used the full $300k NCC bring forward rule may also trigger excess NCC cap issues.

 

Wrong. A self employed person who claims a tax deduction is making a concessional contribution. It is included in the concessional cap.
The only excluded concessional amount (a trap) is when a person has a tax loss and a apparent concessional contribution is stopped from being one.

eg Fred is a sole trader and earns $30K income. He contributes $3K of super. Fred has a rental loss of $30K. Technically he cannot make a concessional contriution as super contributions cannot create a tax loss but he wont know this so one of two issues occurs
1. He seeks to claim a deduction. When he lodges (or sometime later) the ATO will cancel the concessional deduction and let Fred know. The contribution will be deemed to be non-concessional since a concessional contributions is one for which a deduction is allowed. Fred should let his fund know by varying his deduction request. The fund will reverse the 15% tax.
2. Fred ignores what the ATO wrote and doesnt tell the fund so he pays 15% tax that he didnt have to.

 

So then they're not actually contributing anything above the available standard caps as to ultimately keep the funds within superannuation they would have to pay excess NCC tax?

 

That's what I meant, perhaps I worded it wrong. Interesting about the tax loss and concessional contribution being stopped though.

 

That's all needing personal advice