Dealing with excess concessional contributions sometimes created by retaining superannuation guarantee (SG) payments from multiple employers is an easier process than having to request they withhold the SG and nominating the periods when it is not paid, a super specialist has claimed.
BT technical consultant Matt Manning said the advantage of receiving all SG payments during the year from multiple employers was there was less work to do during that 12 months and action only had to be taken at 30 June.
“The implications of doing nothing is that a fund member will get an excess contribution notice from the ATO for which the tax penalty is extremely mild,” Manning said yesterday during a briefing to advisers.
“The member will get an opportunity to release that amount from super and, apart from the small penalty, pay tax at their marginal rate on the excess, which would have happened if it was paid as salary, and elect to refund that amount from the super environment.”
He noted it was at this stage that super fund members had to take action because a failure to release the excess concessional amount could flow into the non-concessional cap.
“This is usually no big deal, but if they have fully used the non-concessional cap, they can end up with an excess here where the penalty is harsher and effectively get a double excess notice,” he added.
“Even worse, they can inadvertently trigger the bring-forward provision by that excess concessional amount becoming non-concessional.”
Despite this, he maintained it was a simpler process than opting out of receiving SG from an employer.
“I would argue that opting out of SG is probably more work. You can’t just decide to do that with your employer. You have to apply to the ATO for approval and complete a new application every year and have to select the quarters in which you will opt out,” he said.
“We would then have to say to the employer: ‘Because you’re saving that SG amount, will you increase my salary by that amount?’ They probably will in all fairness, but again that’s going to come down to the negotiation with the employer.
“I would argue it’s a subjective choice, but people probably shouldn’t opt out because in my experience as long as you release the excess concessional contributions, that is less painful to deal with than the application process and running around to sort things with an employer.”
