Avoiding Excess Contributions Tax: Bookkeeping Tips for Superannuation

Contribution Caps Explained

The concessional contributions cap is currently $30,000 per financial year. This covers payments like Super Guarantee (SG), salary-sacrifice, and personal contributions you claim as an income tax deduction. The non-concessional contribution cap is $120,000 per year and applies to after tax income you put into super without claiming a tax deduction.

How Caps Interact

Every contribution must count towards either the concessional cap or the non-concessional cap. If you accidentally go over, you create excess concessional contributions or excess non-concessional contributions. This can lead to extra tax and more paperwork. Keeping track of your contributions and understanding how the caps work is the best way to stay out of trouble.

Common Challenges

There are a few situations that catch people out:

• Multiple payrolls: If you have more than one employer, both may be paying SG, which can push you over the concessional contribution cap.

• End-of-year transfers: A payment made on 30 June that arrives in your super account on 1 July will count towards the next financial year’s cap, which can be confusing.

• Rapid growth in super balance: If your total super balance reaches $1.9 million, you can’t make any further non-concessional contributions.

Everyday Bookkeeping Foundations

Good bookkeeping is the key to staying within the rules and avoiding excess contributions. Simple habits and regular checks can make all the difference.

Track Money In

Set up separate ledger accounts for SG, salary-sacrifice, personal contributions, and special deposits like downsizer contributions or structured settlement payments. This helps you see exactly how much has already been contributed and how much headroom you have left under each cap.

Timing and Cut-Off Calendar

Contributions count when the money reaches your super account, not when you send it. Mark public holidays and bank cut-offs on your calendar and aim to send payments at least five business days before 30 June. This gives you a buffer in case of delays.

Real-Time Dashboards

Use cloud bookkeeping software to keep track of contributions in real time. Set up alerts so you get a warning when you’re getting close to a cap. This gives you time to pause voluntary contributions and avoid going over.

Reconciling Regularly

Reconcile your payroll journals with clearing-house receipts and fund statements every month. This helps you catch any errors early and makes sure every contribution is recorded correctly.

Practical Strategies to Stay Under the Caps

There are several simple strategies you can use to stay within the contribution caps and avoid paying extra tax.

• Use the Carry Forward Rule: If your total super balance was below $500,000 at the end of the previous financial year, any unused concessional cap from the last five years rolls forward. This means you can make extra contributions in a good year without going over the cap.

• Activate the Bring Forward Arrangement: If you contribute more than $120,000 of after-tax income in one year, you can use the bring forward arrangement. This lets you contribute up to $360,000 over three years, but you need to keep track of how much you’ve already contributed to the second and third year.

• Fine-Tune Salary-Sacrifice: Agree on a regular salary-sacrifice amount that, together with SG, stays under the concessional contributions cap. Review this amount after any pay rise or bonus to make sure you’re still within the limit.

• Consider Contribution Reserving: If you have a Self-Managed Superannuation Fund (SMSF), you can deposit contributions late in June and allocate them within 28 days of the new financial year. This keeps the money in the right year and helps you avoid excess contributions.

• Multi-Employer SG Exemption: If you receive SG from more than one employer, you can apply for an exemption certificate. This stops you from going over the concessional cap and avoids extra tax.

• Downsizer Contributions: If you’re 55 or older and sell your home, you can make a downsizer contribution of up to $300,000. This doesn’t count towards your concessional or non-concessional contribution cap.

• Government Co-Contribution: If you are a low- or middle-income earner and make personal after-tax contributions to super, you may be eligible for a Government Co-Contribution of up to $500. This payment does not count towards any contribution cap and can help your super balance grow.

• Excess Concessional Contributions Options: If you go over the concessional cap, you can use a release authority to have the fund send up to 85% of the excess to the ATO. This reduces the tax you have to pay. Alternatively, you can leave the excess in super, but it will count towards your non-concessional cap.

• Excess Non-Concessional Contributions Options: If you go over the non-concessional cap, you can withdraw the excess and any associated earnings. The earnings are taxed at your marginal rate. If you leave the excess in super, the ATO will tax it at the highest marginal tax rate, plus interest.

• Check for Errors: Compare the ATO’s figures with your own records. Look for mis-coded personal contributions, delayed bank days, or duplicate entries. If there’s a mistake, ask for a corrected report.

• Ask for Commissioner’s Discretion: In rare cases, if the error was beyond your control, you can ask the Commissioner to re-allocate or disregard the excess contribution. Having clear records and evidence will help your case.

Payday Super and the Road Ahead

From 1 July 2026, employers must make sure super contributions reach the fund within seven days of payday. Missing this deadline will trigger a Super Guarantee Charge, which is not tax-deductible and can be expensive.

To stay on top of this, automate your payments, reconcile within 48 hours, and make sure your team understands that salary-sacrifice changes now affect take-home pay almost immediately. These habits will also help you avoid excess contributions in the future.