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Jean Rey

Nov 30, 2023

Excess Contribution Notice

in SMSF Technical Forum

Hi SMSFAAA team,

Last year (2022 audit), I determined that a member was not eligible to access the bring forward non-concessional contributions cap in the 2022 year because the bring forward period was in operation because of an earlier application of the bring forward rules. Therefore, the $50,000 Non-Concessional contribution resulted in $45,000 excess contributions.

I advised the trustees in my Management Letter that the excess contribution is not a breach of SIS by itself. I advised that the ATO will issue an Excess Contribution Notice to the member – the member then has 60 days to agree to release the excess contribution plus 85% of the associated earnings or retain the excess in the fund (this would be unusual as the penalties (47% tax on the excess) make it highly desirable to have it released). If the member agrees to release the excess, then the ATO issues the fund with a release authority and the fund must pay the excess contribution plus 85% of the associated earnings within 10 business days.

It seems that the ATO didn't send this notice and the member made and extra $41,000 NCC this year resulting in $86,000 ($45,000 (2022) + $41,000 (2023) over the cap.

Is it something normal from the ATO to not issuing this Notice?
When does the ATO usually issue this notice? I would like to advise the trustees.
What are the implications for the fund in the 2023 audit? Still not reportable?

Thank you very much in advance.

Yours Sincerely

1 comment

Comments (1)

Thomas Thuijs

Dec 01, 2023

Hi Jean,

The ATO are notoriously slow in issuing Excess NCC notices. We recently recieved one in July 2023 for the 2019 year.

It is very difficult for the auditor SMSF to determine the extent of whether a contribution threshold has been broken because contributions may have been made to other funds. Or the ATO might enable the excess to be withdrawn from a different fund, at the election of a member.

Having said that Regulation 7.04(3) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘SISR’) imposes a maximum cap on any one contribution to a fund. The rule can come in very handy to overcome excess NCCs.