How to pay any excess contributions tax
Ideally, after learning about superannuation contribution limits and excess contributions tax
, you will be able to avoid being in this situation. However, if events have transpired whereby you do find yourself having exceeded your contribution limits and are subject to excess contributions tax, then its important you understand your options on how to pay, the timeframe's involved, and the process you'll need to go through.Excess concessional contributions tax
If it turns out that you have exceeded your concessional contributions limit, then the ATO (after having received all the required information) will send you a notice of assessment for the relevant year. This assessment will include the amount that you have to pay. Along with this assessment, you'll also receive a voluntary release authority' for the amount of the excess concessional contributions tax liability. It is this authority that allows you (if you wish see below) to release this tax amount from your SMSF.
You actually have a couple of choices in terms of how you pay this tax amount:
You can just pay it yourself out of your regular non-super money
Pay it yourself as above, but then make a request to your SMSF to release those funds to you via the voluntary release authority'.
Use the voluntary release authority' and have your SMSF pay the tax amount directly to the ATO
Any combination of the above.
There are also a few key time limits that you need to keep in mind with all of this:
any excess concessional contributions tax that you are liable for is due and payable 21 days after you receive the ATO assessment notice. Beyond this, the general interest charge (GIC) will apply. However, if you give your release authority to your SMSF within the time allowed for payment, and your fund makes the payment within 30 days (or any delay in payment was not within your control), you can request the ATO to refund any GIC.
if you decide that your going to use the voluntary release authority, you must give it to your self managed superannuation fund within 90 days after the date on the release authority.
your SMSF has 30 days to release the tax amount after receiving the release authority. It must also send both you and the ATO a release authority statement within 30 days after paying the money out.
Excess non-concessional contributions tax
Similar to concessional contributions tax, if it turns out that you have exceeded your non-concessional contributions limit, then the ATO (after having received all the required information) will send you a notice of assessment for the relevant year. This assessment will include the amount that you have to pay. However, this time along with the assessment, you'll receive a compulsory release authority' for the amount of the excess non-concessional contributions tax liability. It is this authority that you MUST use to release this tax amount from your SMSF.
Your options in this instance are slightly different:
You can just pay the tax yourself, however you must still withdraw the tax amount from your SMSF, or;
Have the SMSF pay the tax amount directly to the ATO, or;
Any combination of the above.
The time limits you need to keep in mind are:
you must pay the excess tax to the ATO within 21 days of receiving the assessment notice.
you must also give the compulsory release authority to your SMSF within 21 days after the date on the release authority. If you don't, then you're up for a penalty of 20 penalty units (currently $2,200). However, if you do go over this time limit, your SMSF can still release funds via a compulsory release authority, provided it's within 90 days after the release authority's issue date. After this time, your SMSF cannot release the money.
your SMSF has 30 days to release the tax amount after receiving the release authority. It must also send both you and the ATO a release authority statement within 30 days after paying the money out.
How to pay any excess contributions tax
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