Super contributions – too much can mean extra tax
There are limits on how much you can pay into your super fund each financial year without having to pay extra tax. These limits are called 'contribution caps'.
How much you can contribute to your super fund and whether your fund is allowed to accept your contribution may also depend on your age and total super balance.
Contribution caps apply to all super funds. If you have more than one super fund, all your contributions are added up and count towards your caps.
If you exceed these caps, you may need to pay extra tax. You can avoid this by knowing about your own contribution caps.
Understanding the types of contributions
There are two types of contributions you (or others) can make into your super fund:
Concessional – These contributions come from income that has not yet been taxed. They are also called 'before tax' contributions. Once the concessional contributions are in your super fund, they are taxed at a rate of 15%. You may need to pay extra tax if you exceed the concessional contribution cap.Non-concessional – These contributions come from income that has already been taxed. They are also called 'after tax' contributions. These contributions are not taxed once received by your super fund. However, you may pay tax on them if you exceed your non-concessional contribution cap.
Concessional contributions and contribution capsConcessional contributions are contributions that are made into your super fund before tax. They are taxed at a rate of 15% in your super fund.From 1 July 2021, the concessional contributions cap is $27,500. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).From 1 July 2017 to 30 June 2021, the concessional contribution cap for each year is $25,000.Your cap may be higher if you did not use the full amount of your cap in earlier years. This is called the carry-forward of unused concessional contributions.If you exceed your concessional contribution caps, you will receive a letter (determination) and a notice of assessment in your myGov Inbox.If you receive a letter you must lodge a tax return for that year.Division 293: If your combined income and concessional contributions are more than $250,000 you may have to pay extra tax.If you exceed your concessional contributions capIf you exceed your concessional contributions cap, it means that:the excess concessional contributions amount is included in your assessable income,this amount will be taxed at your marginal tax rate.You may have to pay extra tax.ATO apply a 15% tax offset to account for the contributions tax already paid by your super fund.If you exceed your concessional contributions caps, you may elect to withdraw up to 85% of your excess concessional contributions from your super fund to help pay your income tax liability.When your excess concessional contributions are included in your assessable income it can lead to:you entering the pay as you go (PAYG) instalment system; your existing PAYG instalments being affected. If you do not withdraw your excess concessional contributionsFrom 1 July 2017, if you do not or cannot elect to release your excess concessional contributions, you could be taxed up to 94%. This is because any excess concessional contributions that is not released from the fund count towards your non-concessional contributions cap. Non-concessional contributions and contribution capsNon-concessional contributions are:from your after-tax income;not taxed in your super fund.From 1 July 2021, the non-concessional contributions cap is being increased to $110,000 as a result of indexation in line with average weekly ordinary time earnings (AWOTE). If you contribute more, you may have to pay extra tax.From 1 July 2017 to 30 June 2021, the non-concessional contributions cap is $100,000.Your own cap might be different. It can be:higher, if you can use the bring-forward arrangements;nil, if your total super balance is greater than or equal to the general transfer balance cap ($1.6 million from 2017–21; $1.7 million from 2021–22).If you take money out of your super and put it back later, it counts as a new non-concessional contribution, unless you have claimed and been allowed this amount as a tax deduction.If you have more than one fund, the total of all non-concessional contributions made to all your funds during a financial year count towards your non-concessional contributions cap.You must also lodge a tax return for that year if you exceed your cap. If you exceed your non-concessional contributions capFor most people the non-concessional contribution cap (limit) is $110,000 per financial year (from 1 July 2021).To work out if you have exceeded the non-concessional contributions cap, we assess the information reported to us by your super fund and in your return (if you lodged it) and consider your age (date of birth).You must not apply to your super fund to release an amount relating to exceeding your cap. If you exceed your non-concessional contributions cap:we will send you a determination which explains your options;you must lodge a tax return for that year. If you can't lodge your tax return by the due date, and you do not want us to issue a determination before you lodge, you will need to request a lodgment deferral;we will manage the release of money from your super;you may need to pay extra tax.
Chang Accounting Advisory Pty Ltd, we are CPA practice and tax agent. If you or your families or friends need our services, please feel free to contact our team for any assistance.
This article is for informational purposes only and does not form part of our advice. This article is based on Australian Business Registry Services (ABRS) and Australian Securities & Investments Commission (ASIC). Please contact our team if you need any assistance.Claire Chang, 0497 131 419, email@example.com, WeChat: clairechang26Michelle Cui, 0433 539 870, firstname.lastname@example.org, WeChat: michellejc
Self-managed Super Funds Auditing (“SMSFs”) are a specific type of superannuation fund which have up to six members and are regulated by the Australian Taxation Office (“ATO”). The ATO requires an SMSF audit to be carried out prior to an annual return, even if no contributions or payment are made during the year. In the past, the same accounting firm was permitted to perform both accounting and audit services to SMSFs. However, this was changed following the release of APES 110 Code of Ethics for Professional Accountants in early 2021. The new guidance, issued by the ATO, stipulates that the audit and accounting functions for a SMSF must be carried out by separate service providers.
SMSF Trustee’s legal obligations
It is a legal obligation that the SMSF trustee must have the fund audited every year before lodging the fund’s income tax return. The trustee is required to appoint the SMSF auditor no later than 45 days before the annual return due date. At the time of engagement, the SMSF trustee will be presented with a letter of engagement outlining the scope of the audit as well as the responsibilities of each of the respective parties.
The SMSF audit is usually straight-forward and requires the trustee to provide the auditor the following materials:
Documentations regarding the SMSF transactions and investments；A trustee representation letter which states that the financial statements are correct and compliant with the applicable legislations。
When more information is requested by the auditor, the trustee must provide the information within 14 days.
The SMSF trustee is also required to work with the auditor to rectify any breaches as soon as possible and voluntarily disclose any unresolved breaches via the ATO’s early engagement and voluntary disclosure services.
SMSF auditor’s legal obligations
A SMSF auditor is responsible for independently examining the SMSF’s assets, liabilities and transactions to ensure that the financial records are valid and accurate. The SMSF audit also needs to assess if the SMSF is compliant with the relevant Australian superannuation rules.
A SMSF auditor must:
be registered with the Australian Securities and Investments Commission (ASIC) as an approved SMSF auditorhave a valid SMSF auditor number (SAN)meet ongoing obligations as prescribed by the
- Superannuation Industry (Supervision) Act 1993 (SISA)
- Superannuation Industry (Supervision) Regulations 1994 (SISR), and
comply with ongoing ASIC registration requirements including
- keeping your auditor details up to date
- lodging your annual statement A SMSF auditor must be independent to ensure the objectivity and integrity of the audit, that is, the auditor:does not have any financial interest in the SMSF, orhave personal or business relationships with fund members or trusteesWhen the audits are finalised, the SMSF auditor must complete an independent auditor’s report document supplied by the ATO. The auditor is also required to provide this report to the trustees of the SMSF within 28 days after having received all relevant documentations.If any breaches have been identified during the audit process, the SMSF auditor must report them to the ATO within 28 days using an ATO-provided contravention report document.Chang Accounting Advisory Pty Ltd, we are CPA practice and tax agent. If you or your families or friends need our services, please feel free to contact our team for any assistance. This article is for informational purposes only and does not form part of our advice. This article is based on guidance from Australian Taxation Office. Please contact our team if you need any assistance.Claire Chang, 0497 131 419, email@example.com, wechat: clairechang26Michelle Cui, 0433 539 870, firstname.lastname@example.org, wechat: michellejc
Under new tax rules effective from 30 June 2023, the Queensland Government will calculate land tax on the basis of the total value of your Australian land. The new rules are different from the previous tax rules which calculates land tax on the basis on your Queensland land only.The change in tax rules is an attempt by the Queensland Government to make the system “fairer and more equitable”. This means that owners with interstate properties will face higher land tax in Queensland. Under new tax rules effective from 30 June 2023, the Queensland Government will calculate land tax on the basis of the total value of your Australian land. The new rules are different from the previous tax rules which calculates land tax on the basis on your Queensland land only.The change in tax rules is an attempt by the Queensland Government to make the system “fairer and more equitable”. This means that owners with interstate properties will face higher land tax in Queensland. Queensland land onlyYou will not be affected by the new tax rules if you only own land in Queensland. The land tax rates and exemptions applicable to the calculation of your land tax shall remain the same as before. Currently, you are not required to pay a land tax if your land is less than $600,000 for an individual or $350,000 for companies, trustees and absentees. Queensland and interstate landYou are required to declare your interstate landholdings via your QRO Online account if you own land in Queensland as well as in another state or territory. As of 30 June 2023, you must complete the declaration by the earlier of the following:within 30 days of receiving a land tax assessment notice;on or before 31 October.You must enter the value of each parcel of interstate land when completing the declaration. If you are an individual who falls into this category, your land tax will be calculated based on a total value of the following:the total of your taxable land in Queensland and,the statutory value of your interstate land. The statutory value shall be determined by valuation legislation in the state or territory. The value entered shall either bethe statutory value as of 30 June 2023 or,the most recent value of the landSurcharge An absentee is a foreign individual who do not ordinarily reside in Australia. A foreign individual is considered as an absentee if you:were away from Australia at 30 June, orhave been away from Australia for more than 6 months in total during the financial year before 30 June.An absentee cannot claim a home or primary production exemption and is liable for land tax if the total taxable value is $350,000 or above. In addition to land tax rates for absentees, there is a 2% surcharge when calculating your land tax. The 2% surcharge applies to the total value of your Australian land.Calculating land tax with interstate landDifferent land tax rate will apply to different types of owners when calculating the taxable value of your land. The calculation is done in two steps. The first step is the calculation of the taxable value of your total Australian land. In the second step, the result of the first step is applied to your land in Queensland to obtain the annual land tax liability.When the value of your interstate land is updated, you can notify the Queensland Government for a reassessment of your land tax liability.ExampleOn 30 June 2022, John owns land in Queensland with a taxable value of $650,000.Taxable value of land: $650,000Calculation = $500 + (1 cent x $50,000)= $500 + $500Tax payable = $1,000Suppose if John also owns land in NSWOn 30 June 2022, John owns land in Queensland with a taxable value of $650,000 and land in NSW with a taxable value of $1,250,000. His land tax is calculated using the rates for individualsTaxable value of Australian land: $1,900,000Calculation= $4,500 + (1.65 cents x $900,000)= $4,500 + $14,850= $19,350This amount is applied to the Queensland portion of John’s land (i.e. ($650,000 ÷ $1,900,000) x $19,350)).
The amount on the assessment notice for the land tax is $6,619.73.Excluded landDepending on the ownership and use of the land, you may be eligible for a land tax exemption. Some exemptions are only limited to land in Queensland. More information on exclusions and how to apply will be available after 30 June 2023. Exclusions available for interstate landExemptions available for Queensland land only Home (principal place of residence)Government land Primary productionPort Authority land Supported accomodations Societies, clubs and associations Moveable dwelling (caravan) park Retirement village Transitional home Charitable institutions Aged care Chang Accounting Advisory Pty Ltd, we are CPA practice and tax agent. If you or your families or friends need our services, please feel free to contact our team for any assistance. This article is for informational purposes only and does not form part of our advice. This article is based on Australian Taxation Office (ATO). Please contact our team if you need any assistance.Claire Chang, 0497 131 419, email@example.com, WeChat: clairechang26Michelle Cui, 0433 539 870, firstname.lastname@example.org, WeChat: michellejc