Making additional personal contributions to superannuation is a tax-efficient way to boost your retirement savings. But there are strict caps or limits on the amount you can contribute each year and stiff tax penalties for exceeding them.
It’s crucial to keep a close eye on the total contributions, both from you and your employer, to your superannuation fund. This vigilance can prevent you from inadvertently exceeding the annual caps and facing hefty tax penalties.
What is the Excess Contribution Charge (ECC)?
It’s a charge you incur if you contribute more than the allowed amount to your super each year.
The amount of concessional (before tax) contributions you can make to your super each financial year without paying extra tax is limited.
The concessional contribution cap is $30,000 for the 2025 financial year. This includes any contributions made into your account by your employer and any salary sacrifice amounts.
If your superannuation contribution has exceeded the concessional contribution cap ($30,000 for the 2025 year), you will be subject to the Excess Contribution Charge.
Once you have lodged your tax return, the ATO will advise you if you have an Excess Contribution Charge obligation.
These excess contributions are added to your taxable income for the financial year, and you are liable to pay a tax adjustment. In addition, you will also incur an excess concessional contributions charge.
What are my options to pay ECC?
You will have to arrange payment of the amount before the due date, and you have two options:
Option 1: You can pay the tax from your own funds.
Option 2: Alternatively, you can elect to have 85% of the excess contributions from your superannuation fund withdrawn, which will be used to pay the tax assessment.
Be aware that an Election Form needs to be lodged with the Australian Taxation Office.
We recommend you elect to release the funds from your superfund account.
Please contact us if you need our assistance with this Election Form or to release the funds from your Superfund.
Concessional Contributions (CC) and Non-Concessional Contributions (NCC)
There are primarily two methods for contributing to your superannuation: concessional and non-concessional. Concessional contributions involve allocating pre-tax dollars to your superannuation account, while non-concessional contributions are made with after-tax funds.
There is an annual cap for both CC and NCC; for the 2025 financial year, it is $30,000 (for CC) and $120,000 (for NCC).
If your super account balance could do with a bit of help and you haven’t used the entire amount of your annual concessional contributions cap in recent years, you may be eligible to contribute a more significant amount using the ‘carry-forward’ rule.
For more information on the cap and the carry-forward amounts, please see here:
Optimising Super Contributions
