Contribution Cap Breach Discovered After ATO Notice
Priya is 58 and the sole member of an SMSF. In May 2025 her accountant discovers that a $40,000 personal contribution banked in June 2024 was recorded by the fund as a non-concessional contribution, but Priya had also claimed a $30,000 personal deduction for the same money in her 2023-24 return. Her total super balance at 30 June 2023 was $1.62 million. The fund's 2023-24 concessional contributions from her employer were $22,000. The ATO has issued a determination showing excess concessional contributions and the fund has already lodged its 2023-24 annual return. Priya wants to know whether she can simply reclassify the $30,000 as non-concessional and move on. The trustee is Priya and her adult son, who is not a member.
1. Assess the contribution cap position for 2023-24 and explain the correct treatment of the $30,000 deduction claim.
Read the worked answer
The starting point is to test the money against the correct cap, not the label the fund used. By claiming a personal deduction, Priya made the $30,000 a concessional contribution; the fund's bookkeeping label does not change its character. Concessional contributions for 2023-24 are therefore $22,000 employer plus $30,000 personal = $52,000 against a $27,500 cap, an excess of $24,500. The excess is included in her assessable income and taxed at marginal rates, with a 15% offset for tax already paid by the fund; she may elect to release up to 85% of the excess to pay the liability. Reclassification is not available because the deduction has already been claimed and the character of the contribution is fixed by that claim. The $40,000 cannot be counted as non-concessional as well; doing so would double count it. If she wanted to unwind the deduction she would need to seek an amendment within the time limits and the ATO's position on the contribution would still depend on the facts. The practical lesson is to reconcile contribution notices against fund records before lodging.
2. If Priya instead wanted to make a $300,000 non-concessional contribution in 2024-25, what constraints apply given her balance and the earlier breach?
Read the worked answer
Two constraints operate. First, the non-concessional cap for 2024-25 is $120,000, with a bring-forward of up to $360,000 over three years only if her total super balance at 30 June 2024 is below the $1.9 million general transfer balance cap threshold. Her balance at 30 June 2023 was $1.62 million, but it will have grown with earnings and the excess concessional contribution; the trustee must obtain the 30 June 2024 balance before assuming bring-forward is available. If the balance is at or above the threshold, her non-concessional cap is nil. Second, the earlier excess concessional contribution does not itself reduce the non-concessional cap, but any excess non-concessional contribution would be subject to the 47% tax on excess plus possible release. A $300,000 contribution in one year exceeds even the maximum bring-forward amount and would create an excess unless spread across years. The adviser should also confirm she does not trigger the work test or the $300,000 three-year bring-forward eligibility rules incorrectly.