Excess Super Contributions: Tax Treatment Explained

Excess contributions are no longer generally subject to a standalone “excess contributions tax” as they once were, before 2013.

There are two types of super contributions caps, concessional and non-concessional. Each contribution type has has different consequences when exceeded.

Concessional excess amounts are included in your assessable income and taxed at your marginal rate, with adjustments.

Non-concessional excess amounts may still attract a penalty tax if not withdrawn.

How much tax is payable on excess super contributions?

Excesses of concessional and non-concessional contributions have differing tax treatments.

Excess Concessional Contributions

The excess tax on concessional super contributions is contained in a notice of assessment sent to you from the Tax Office.

Concessional contributions are those which are tax deductible, and are taxed at a rate of 15% in the super fund. They will include super guarantee, salary sacrifice and personal deductible contributions,

The Tax Office calculates the tax assessment by comparing the data in your tax return with that of the super fund.

The notice of assessment will include the excess contributions as income, so the excess is included in your assessable income and taxed at your marginal tax rate (i.e. potentially up to 47% including medicare).

The assessment will also include:

• time-based charges to compensate the Tax Office for the delay in tax collected on the excess contributions; less
• a tax offset at the rate of 15% of the excess contributions which recognises the 15% tax paid by the super fund; and
• an option to withdraw 85% of the excess contributions. There is a 60-day time limit, and an election is non-revocable.

Withdrawal of the excess contributions provides funds to pay the additional tax assessment should that be required.

Importantly, however, unless the excess concessional contributions are withdrawn, the full amount of the excess will be counted as non-concessional contributions.

Depending on your position, this could result in additional tax of 47% including medicare if non-concessional contributions are pushed over the non-concessional cap limits.

Worked Example: Excess concessional contributions

Assumptions

• Concessional cap for the year: $30,000
• Alex’s total concessional contributions (employer SG + salary sacrifice): $40,000.
• => Excess concessional contributions: $10,000.
• Alex’s marginal tax rate: 47% (including Medicare).
• Fund has already paid 15% tax on all concessional contributions.

Step 1 – Include excess in assessable income

The ATO adds the excess concessional contributions to Alex’s assessable income.

• Extra assessable income: $10,000.
• Extra tax at marginal rate:
  • $10,000 × 47% = $4,700 additional tax.

Step 2 – Apply 15% tax offset

Because the fund has already paid 15% on the $10,000, Alex gets a non‑refundable tax offset of 15% of the excess.

• Offset: $10,000 × 15% = $1,500.
• Net extra tax: $4,700 – $1,500 = $3,200 (ignoring the excess concessional contributions charge interest)

Step 3 – Option to release excess from super

Alex can choose to:

• Leave the $10,000 in super and pay $3,200 personally, or
• Request release of up to 85% of the excess from super to help pay the tax

If Alex elects to release:

• Release amount: $10,000 × 85% = $8,500 sent from the fund to the ATO under a release authority.
• The ATO uses $3,200 of that to cover Alex’s extra tax, and refunds the remaining $5,300 to Alex (assuming no other tax debts)

Step 4 – Impact on non‑concessional cap

If Alex doesn’t release the excess:

• The $10,000 excess concessional contributions are also counted towards Alex’s non‑concessional contributions cap.
• If Alex is already close to (or has triggered) the non‑concessional cap, this $10,000 might cause a non‑concessional excess problem as well.

See also:

• Excess Contributions: What if you exceed the caps | Heffron
• If you exceed your concessional contributions cap | ATO

Excess Non-Concessional Contributions

Non-concessional contributions are those for which a tax deduction is not claimable.

When excess contributions are detected, the Tax Office sends a determination which sets out two options, exercisable within 60 days and are non-revocable.

Option 1 is applied by default if you take no action within 60 days, and enables the withdrawal of the excess contributions plus 85% of associated earnings from the super fund (after 15% tax is withheld).

The associated earnings are added to your other income to be taxed at the applicable marginal rate, less a 15% tax offset which recognises the tax paid in the super fund.

For certain defined benefit fund interests, the release option may be limited or unavailable.

Option two allows the excess contributions and associated earnings to remain in the super fund. The excess contributions are taxed at the highest marginal tax rate, currently 45% plus medicare at 2%. The ATO provides authorisation to release sufficient funds from the super fund in order to pay the tax.

If the fund has insufficient funds to pay the tax the obligation to pay falls on the individual.

Worked Example: Excess non‑concessional contributions

Assumptions

• Non‑concessional cap for the year: $120,000 (assumed single‑year cap; ignoring bring‑forward).
• Priya makes non‑concessional contributions of $150,000.
• => Excess non‑concessional contributions: $30,000.
• Her marginal tax rate: 39% (including Medicare).

The ATO gives Priya two options via a determination.

Option 1 – Withdraw excess plus notional earnings (default)

Step 1 – ATO calculates associated/notional earnings

Assume the ATO calculates notional associated earnings of $3,000 on the excess $30,000.

• Excess non‑concessional contributions: $30,000.
• Associated earnings: $3,000.

Step 2 – Withdrawals and tax

Priya can elect (or default) to withdraw:

• $30,000 (the excess), plus
• Associated earnings (with 15% tax withheld inside super before release).

Tax treatment:

• The $30,000 itself is not taxed personally.
• The $3,000 associated earnings are added to Priya’s assessable income and taxed at marginal rate, with a 15% offset.

Calculation:

• Tax on $3,000 at 39% = $1,170.
• Offset 15% of $3,000 = $450.
• Net tax on associated earnings = $1,170 – $450 = $720

Cash flow:

• The fund calculates the amount to release and sends it to the ATO under a release authority.
• The ATO keeps $720 (plus any other personal tax debts) and refunds the balance to Priya.

Result:

• Priya has removed the excess from super.
• She avoids the 47% tax on the $30,000 excess non‑concessional contributions.

Option 2 – Leave the excess in super and pay tax

If Priya instead elects to leave the $30,000 in super, then:

• The excess $30,000 is taxed at the top marginal rate (currently 45% plus Medicare levy).
• Tax on $30,000 at 47% = $14,100.

Process:

• The ATO issues a release authority to Priya’s fund to release enough money to pay $14,100.
• If the fund does not hold enough to cover that tax, Priya remains personally liable for the balance.

This option is usually chosen only if there is a strategic reason to keep the full $30,000 in super despite the very high tax cost.

See also:

• Excess Contributions: What if you exceed the caps | Heffron
• If you exceed your non-concessional contributions cap | ATO

How To Avoid Excess Contributions Tax

Tax on excess contributions is avoided by keeping contributions within the caps.

The other way is obtaining the Tax Commissioner’s to disregard or reallocate excess contributions in limited circumstances.

Tax Commissioner’s Discretion To Disregard Or Reallocate Excess Contributions

Commissioner discretion is limited to circumstances where the breach occurred due to factors outside the individual’s control and where it is fair and reasonable to do so.

Examples might include the super fund receiving compensation from a financial services provider; or a contribution allocated by the Fund’s administration to a tax year earlier or later than intended.

The bases on which the Commissioner’s discretion is exercised are reviewed in Super contribution caps and further in Law Administration Practice Statement PS LA 2008/1.

The ATO’s form “Application – excess contributions determination” (NAT 71333) is used to apply for a determination to disregard or reallocate contributions where you believe you’ve exceeded a cap due to special circumstances.

The Application requires the taxpayer to explain:

• What happened with the contribution.
• Why it caused the cap to be exceeded.
• Why there were special circumstances and
• Why the Commissioner should disregard or reallocate an amount.

Timing of Contributions is Crucial

Contributions are regarded by the Tax Office as being paid at the time they are received by the fund, and the timing of contributions is a critical factor in determining the relevant year for caps calculations.

Employer contributions will most often be received by the fund after a period end. This means that if the period end also happens to be the end of the financial year, the contributions will form part of the later year’s contribution caps calculations.

Salary sacrifice contributions by their nature are attributed to the concessional cap.

Contribution Reserving

The Tax Office recognises ‘contribution reserving’ as a valid strategy (see TD 2013/22). See more about this here and commentary here.

Form NAT 74851 is used to notify the Tax Office where concessional contributions in one financial year were not allocated until the following financial year by the Super Fund. This form cannot be used non-concessional contributions.

Other Information

• Contributions for 2012–13 and earlier years
• Exercise of Discretion In Special Circumstances – Excess Contributions Tax – (pre-1 July 2013)
• Division 293 tax

This page was last modified 28 Jun 2026