Superannuation is one of the most tax-effective ways to save for retirement. But the government sets strict annual limits, called contribution caps, on how much you can add to your super. If you go over these caps, you may face extra tax.

Here’s what happens, your options, and how to avoid breaching the limits.

 

Understanding Super Contribution Caps

There are two main types of contribution caps in Australia:

1. Concessional Contributions Cap

• Contributions made before tax, such as:

•           Employer Super Guarantee (SG) payments
•           Salary sacrifice contributions
•           Personal contributions you claim a tax deduction for

• Cap for 2025/26: $30,000 per year

2. Non-Concessional Contributions Cap

• Contributions made after tax, such as personal contributions where no tax deduction is claimed
• Cap for 2025/26: $120,000 per year
• Bring-forward rule: If you’re under 75, you can contribute up to $360,000 (three years’ worth) in one year, but then you can’t contribute again for the next two years

 

What Happens If You Go Over the Caps?

If you exceed the cap, the ATO (Australian Taxation Office) will issue an excess contributions determination notice. This notice explains:

• How much you went over
• Your tax liability
• Your options for resolving the excess

 

Exceeding the Concessional Contributions Cap

If you go over the $30,000 concessional cap:

• The excess is added to your taxable income
• You’ll pay tax at your normal income tax rate
• You’ll receive a 15% tax offset (since your super fund already paid tax on that contribution)

Your Options:

1. Withdraw up to 85% of the excess from your super to help pay the tax
2. Leave the money in super and pay the extra tax from your own funds (note: it will also count towards your non-concessional contributions cap)

 

Exceeding the Non-Concessional Contributions Cap

If you exceed the $120,000 non-concessional cap (or $360,000 under the bring-forward rule):

Your Options:

1. Withdraw the excess contributions

•           Includes any earnings made
•           Earnings are taxed at your normal rate, but you’ll receive a 15% offset
•           No penalty tax applies

2. Leave the excess in your super

•           The excess will be taxed at 47%
•           This is rarely beneficial, which is why most people choose to withdraw the excess

 

Tips to Avoid Exceeding Super Contribution Caps

•   Track your contributions – Confirm with your employer and super fund how much has been paid each year
•    Watch the timing – Contributions are counted when your fund receives them, not when you send them
•    Be mindful of the bring-forward rule – Using it locks you out of future non-concessional contributions for two years
•   Check via myGov – Link to the ATO to view real-time contribution data

 

Key Takeaway

Exceeding your superannuation contribution caps can be costly, but the ATO has processes to help you manage it. Understanding the rules, responding quickly to ATO notices, and getting professional advice will help minimise extra tax and keep your retirement savings on track.

If you’re unsure what to do, speak with a tax adviser or financial planner—expert guidance can save you stress and money.