What Happens When You Exceed the Concessional Contributions Cap

You maximised your super contributions, thought you had everything right and then received an ATO notice saying you have exceeded your concessional contributions cap. For many salaried professionals and business owners, this is a confusing moment. The consequences are manageable, the process is specific, and the earlier you act, the better your outcome. If you want specialist super tax advice in Epping or Melbourne’s north, RPS Accountants can help you navigate the Determination before the 60-day window closes.

What Are Concessional Contributions?

Concessional contributions are contributions made to superannuation that are taxed at 15% inside the fund rather than at your personal marginal rate. They include:

• Employer contributions — the compulsory super guarantee, currently set at 11.5%
• Salary sacrifice contributions — additional super directed from pre-tax salary
• Personal contributions for which you claim a tax deduction — available to self-employed individuals and those not receiving employer super

The concessional contributions cap for 2024-25 is $30,000 per financial year — this is the combined total across all contributions from all sources and all funds. It is not per fund and not per employer. Verify the current cap at ato.gov.au as it is indexed periodically it was $27,500 in 2023-24. A tax planning review mid-year is the simplest way to stay inside the cap.

Why Do People Accidentally Exceed the Concessional Cap?

Many people breach the cap without realising. Common causes include:

• Salary sacrificing on top of a higher employer contribution — particularly in professional or executive roles
• Changing jobs mid-year with different super arrangements at each employer
• Making a personal deductible contribution without accounting for employer contributions already made for the year

This is a particular risk for small business owners and sole traders whose income — and contribution patterns — vary year to year. The common financial challenges facing small business owners often include super contribution timing, especially when income is uneven across the financial year.

How Does the ATO Detect Excess Concessional Contributions?

Your superannuation fund reports contributions to the ATO through the Member Contributions Statement process. When you lodge your tax return, the ATO cross-references that data against the concessional cap. This happens after your return is lodged. You will not catch the breach yourself at lodgement time, the ATO’s assessment typically arrives in the months after. The ATO issues an Excess Concessional Contributions Determination setting out how much you have exceeded the cap, the tax consequences, and your options. It is a notification, not an immediate demand but it starts a 60-day decision window.

How Are Excess Concessional Contributions Taxed?

The excess amount is included in your assessable income for the year, taxed at your marginal rate, the same as ordinary income. Because that money has already been taxed at 15% inside your super fund, you receive a 15% tax offset against the income tax on the excess. Example: If your marginal rate is 39% (37% + 2% Medicare) and you have $5,000 in excess contributions, the income tax is roughly $1,950. The 15% offset reduces this by $750, leaving $1,200 in additional tax payable. That is the top-up your marginal rate charges over and above the 15% already paid inside the fund.

The ECES Interest Charge

On top of the income tax, the ATO charges a shortfall interest charge on the excess from the first day of the income year to the date of the Determination. This is the Excess Concessional Contributions Earnings charge the ECES. The rate changes quarterly and is set by the ATO — confirm the current rate at ato.gov.au. The ECES charge is not large in absolute terms for modest excesses. But it is not optional, and it adds to the cost of the breach. Proactive monitoring of your contribution balance throughout the year not just in June is the simplest way to avoid it.

What Are Your Options After Receiving an ECC Determination?

When you receive an ECC Determination, you have 60 days to make a decision. There are two paths:

Option 1: Request Release From Your Super Fund

You can direct your super fund to release an amount equal to 85% of the excess contributions — the remaining 15% stays in the fund to offset the tax already paid there. The released amount is used to pay the additional income tax on your return. This keeps the money out of super and prevents it from counting against your non-concessional cap.

Option 2: Retain the Excess in Super

If you do not make a release direction, the excess stays in your super fund. You still pay the income tax — it is added to your assessment. Additionally, the excess is automatically treated as a non-concessional contribution, which reduces your non-concessional cap for the year. If you are already close to the non-concessional cap, this creates a second breach. A registered tax agent can model the after-tax impact of both choices before you decide — particularly relevant if you have already made non-concessional contributions for the year.

What Are Carry-Forward Concessional Contributions and How Do They Help?

Since 1 July 2018, eligible individuals can carry forward unused concessional contribution cap amounts from prior years. If your total super balance was below $500,000 at 30 June of the prior financial year, you can access unused cap amounts from the previous five years. This is one of the most underused strategies in tax planning for Melbourne small business owners and employees with variable income. Rather than accidentally breaching the annual cap, you may be able to deliberately contribute an amount above the annual cap using your carry-forward balance without triggering any excess. This requires knowing your carry-forward balance before making contributions. Important: Carry-forward contributions cannot fix an excess after the fact. They must be factored in before the contributions are made. If the ATO has already issued a Determination, the excess has occurred and cannot be reversed using carry-forward. This is a planning tool not a remedy. Your carry-forward balance is visible in your myGov ATO online account under the Superannuation section. This strategy is particularly relevant for people who had career breaks, parental leave, or lower-income years in recent history; those approaching retirement wanting to catch up; self-employed individuals with variable annual income; and anyone who has recently sold a business or investment asset.

What Is Division 293 Tax and Who Does It Affect?

If your income — including concessional contributions — exceeds $250,000, you are subject to Division 293 tax. This is an additional 15% on the lower of your concessional contributions or the amount by which your income exceeds $250,000. The effective rate on concessional contributions becomes 30% rather than 15%. This is assessed separately from excess contributions if it applies, you receive a separate ATO assessment. A chartered tax advisor can help you decide whether to pay this personally or release it from super within your 60-day window.

How Do You Avoid Exceeding the Concessional Cap in Future?

• Log into myGov and check your super contribution history under the ATO section before making any additional contributions
• If you salary sacrifice, confirm the combined total of salary sacrifice and super guarantee against the current annual cap before year end — not in June when it may be too late
• If you change employers mid-year, get the super guarantee figures from your previous employer before your new salary sacrifice arrangement starts
• If you make personal deductible contributions, account for employer contributions already made for the year before submitting the notice of intent to claim a deduction
• Ask your accountant to review projected contributions at a mid-year check — see what questions to bring to that conversation

Frequently Asked Questions

What happens if I exceed my concessional contributions cap?

The ATO sends an Excess Concessional Contributions Determination. The excess is added to your assessable income and taxed at your marginal rate, with a 15% offset to account for tax already paid inside the fund. An ECES interest charge also applies from the start of the income year. You then have 60 days to choose whether to release funds from super or retain them.

What is the concessional contributions cap for 2024-25?

$30,000 per financial year, covering all concessional contributions from all sources — employer super guarantee, salary sacrifice, and personal deductible contributions combined. This increased from $27,500 in 2023-24 with indexation. Confirm the current cap at ato.gov.au each year before finalising your contribution strategy.

Can carry-forward contributions fix an excess after it happens?

No. Carry-forward concessional contributions must be factored in before contributions are made. If the ATO has already issued a Determination, the excess has already occurred and cannot be reversed using carry-forward. Carry-forward is a planning tool for contributions not yet made — not a remedy for contributions already processed.

Is there a financial penalty for excess concessional contributions?

There is no separate named penalty. The consequence is that the excess is taxed at your marginal rate with the 15% offset, and the ECES interest charge applies. The ECES rate is set quarterly by the ATO. For modest excess amounts, the total additional cost is manageable. For larger excesses or high marginal rates, the impact is more significant — and in all cases, avoidable with proper contribution monitoring.

Where can I get super contribution advice in Epping or Melbourne’s north?

RPS Accountants assists individuals across Epping and Melbourne’s northern suburbs with superannuation tax issues — from excess contribution Determinations to carry-forward strategies and Division 293 assessments. Visit our SMSF and superannuation services or call 1300 110 120 to speak with a registered tax agent. You can also book online at rpsaccountants.com.au.

Received an ATO Determination About Your Super Contributions?

RPS Accountants assists individuals across Epping and Melbourne’s northern suburbs with superannuation tax issues — from excess contribution Determinations to carry-forward strategies and Division 293 assessments. Call 1300 110 120 or visit rpsaccountants.com.au to book with a registered tax agent.