Taxman targets excess superannuation contributions

THE taxman is targeting investors who put away too much super, with an estimated 70,000 people expected to face hefty fines.

Thousands of people face tax penalties and fines for putting too much extra money into super, the ATO warns / File

THE Australian Taxation Office has launched a tough new crackdown on excess superannuation contributions, with investors warned they will face heavy penalties for breaching the maximum amounts.

About 70,000 people could be facing penalty tax charges by later this year as a result of putting too much money into their super funds.

Specifically, the tax office is warning self-managed super members against tipping in excess contributions, including the use of a popular new scheme which splits the money into a separate trust.

Hefty penalties apply to all super members who make excess deposits, and the warning comes as we enter the final months of the financial year, when people traditionally stash extra money in their funds.

Careful monitoring of all contributions is now essential.

About 35,000 people are already facing fines and penalties for putting too much money into their super after the laws were applied to the June 2007 tax year.

However, at least a similar number are expected to be hit again after June 30 this year, superannuation lawyer Dan Butler from DBA Lawyers says.

Mr Butler warns that the tax office is taking a "hard stance on excess contributions'', which has the potential to effect more than 35,000 people.

People aged under 50 cannot put in more than $25,000 from before-tax income and are limited to $150,000, including after-tax contributions, in one year.

People over age 50 can put in up to $50,000 from before-tax income and are also limited to a total of $150,000 a year.

In only its second taxpayer alert for 2010, the ATO warns about excess contributions and highlights the increasing use of a method being used by self-managed funds to avoid a technical breach of the rules.

The DIY funds involved contain a clause in their trust deed that allows excess contributions to be identified and held in a separate trust but which still lets the extra payments be mixed in with all the other super money.

Mr Butler says the ATO has yet to release any legal authority supporting the new ATO opinion, and many professional organisations are seeking the withdrawal of the alert.