The contribution caps were first introduced in 2007. Since then, excess contributions has become one of the main costly tax traps for many SMSF members. As part of the tax reform regime, from 2013 to 2015, the Government has made several amendments in order to provide a better mechanism for the fund members to release the excess contributions from their fund.

The below table provides a snapshot of the key changes in new refund mechanism before and after 1 July 2013:

 Excess of Concessional Contributions (‘ECC’)Excess of Non Concessional Contributions (‘Excess NCC’)
Before 01 July 2011No refund option available.

ECC taxed at 46.5% (being 15% contribution tax plus 31.5% excess contribution tax).

Furthermore, the ECC was also counted towards the Non Concessional Contribution (‘NCC’) Cap. So, if a member had also maxed out their NCC cap for that financial year, an additional 46.5% tax was imposed. This means it is possible to have an effective tax rate of 93% on this amount.
No refund option available.

The excess amount will be taxed at 46.5%.
From 01 July 2011 to 30 Jun 2013If:
- members breached the concessional contribution cap for the first time and,
- the breach is below $10,000;

Members could have 85% of their ECC refunded to them and the grossed up amount taxed at their marginal rate with a 15% tax offset.

Otherwise, the ECC will be taxed at an overall effective rate of 46.5% (including excess contributions tax)
No refund option available.

The excess amount will be taxed at 46.5%.
From 01 July 2013The ECC are now included in the individual’s personal assessable income and taxed at their marginal rates plus also liable to pay an excess concessional contributions charge.

Any resulting tax payable is reduced by a 15% tax offset.

The individual is entitled to make an election to release up to 85% of the ECC. The election to release ECC must be made to ATO within the required time frame and in an approved form.

Any unreleased ECC will still be counted toward the NCC cap.
The excess NCC can be withdrawn in full with 85% of the associated earnings which are determined by the Commissioner. The election to release excess NCC must be made to the ATO in the approved form and within the required time frame.

The associated earnings will be counted toward the individual’s personal assessable income and taxed at their marginal tax rate.

The associated earnings are calculated using the average General Interest Charge rate for each quarter during the relevant financial year. Hence, it may differ to actual earnings of the Fund.

If member chooses not to withdraw, the ENCC will be taxed at top marginal tax rate plus Medicare Levy.