What to do if you exceed your super contribution caps

Superannuation is a great way to save for retirement, but the government sets strict limits on how much you can contribute each year. These limits are called contribution caps. If you go over them, you could face extra tax. But don’t panic – here’s what you need to know and the steps to take if this happens.

Understanding the caps

There are two main caps you need to keep in mind:

  1. Concessional contributions cap
    • These are contributions made before tax, such as employer super guarantee (SG) payments, salary sacrifice, and personal contributions you claim a tax deduction for.
    • For the 2025/26 financial year, the cap is $30,000 per year.
  2. Non-concessional contributions cap
    • These are contributions made from your after-tax income, like personal contributions where you don’t claim a tax deduction.
    • The cap is $120,000 per year, or up to $360,000 if you use the “bring-forward” rule (this allows you to contribute three years’ worth at once if you’re under 75).

What happens if you go over?

If you exceed either cap, the ATO will issue an excess contribution determination notice outlining your options for resolving the excess.

This letter will explain what happened and tell you how much tax you’ll need to pay on the excess amount.

Your options if you exceed the concessional cap

If your concessional contributions go over the $30,000 cap, the excess amount is added to your taxable income. This means you’ll pay tax on it at your normal income tax rate, but you’ll get a 15% tax offset because your super fund has already paid tax on that money.

You have two choices:

Either way, the ATO will calculate how much tax you owe, so there’s no guesswork on your part.

Your options if you exceed the non-concessional cap

If you exceed the non-concessional cap, the ATO will give you two choices:

  1. Withdraw the extra contributions out
  1. Leave the excess contributions in your super fund:
    • You’ll pay a 47% tax on the excess amount.
    • This option is rarely beneficial which is why most people choose to withdraw the extra amount to avoid the big tax hit.

Tips to avoid going over the caps

The bottom line

Exceeding your super caps can be stressful, but the ATO has a process to help you manage it. Understanding your options and acting quickly when you receive a letter will help you reduce extra tax and keep your retirement savings on track. Remember, if you’re unsure what to do, come and talk to us – we’re here to guide you through it.

What happens if you don’t have a valid will?

When someone passes away without a valid will, this is known as intestacy. In this situation, the law in each state and territory sets out a formula for how your estate is divided. These rules often follow a standard order – spouse first, then children, then other relatives, but they may not align with what you would have wanted.

Who usually inherits the intestate estate?

If you have a spouse and no children, your spouse will ordinarily receive the whole estate. If you have a spouse and children, whether the children receive anything depends on whether they are also the children of your spouse, as well as the laws of your state.

If you do not have a spouse or children, your estate may pass to your parents, then to siblings, and then to the next of kin, but this can vary between states. If there are no surviving and eligible relatives, the state you live in will typically receive the estate.

Family provision

It is also worth noting that even when an estate is distributed under intestacy laws, certain family members or dependants may still be able to apply to the court if they feel they have been left without proper provision. These are called family provision claims. Eligible people – typically a spouse, partner, child, or someone dependent on the deceased, can ask the court to adjust the distribution to ensure fair support. This process is separate from intestacy and can apply whether or not there is a will.

Not everything is subject to intestacy laws

Your super fund may decide which of your eligible beneficiaries receives your super, or it may pay the benefit to your estate. If your super fund allows for binding death benefit nominations, you can direct your super fund to pay it to an eligible beneficiary. Life insurance payouts on policies you personally own can also be directed in accordance with your wishes and may not necessarily form part of your estate. Remember jointly-owned property typically passes to the surviving joint owner.

Estate administrator

Who handles the paperwork if there’s no will? Instead of an executor named by you, the court appoints an administrator. This is often your partner or next of kin, who will collect assets, pay the estate’s debts and expenses, and then distribute the balance under the local intestacy law. Administrators step into a formal legal role and their authority begins once the court makes the grant.

Funeral and burial arrangements

One of the most pressing questions after a death is who decides on funeral arrangements. If there is no will appointing an executor, the right to organise the funeral and burial usually follows the same order as for administering the estate. It lies with the person who has the highest claim to be the administrator, typically the surviving spouse or de facto partner, or if none, the next of kin.

Key point

Dying without a will means giving up control over who manages your estate, who inherits from it, and even who decides on your funeral arrangements. While intestacy laws provide a safety net, they may not reflect your personal wishes or the needs of your loved ones. Making a valid will ensures your estate is handled the way you want and spares your family unnecessary uncertainty and stress.

CGT and off-the-plan purchases

If you buy a property in an off-the-plan purchase, there are some important CGT issues to be aware of – especially in the context that an off-the-plan purchase may not actually settle until many months or even years after the initial contract is signed.

The first thing to note is that assuming the off-the-plan purchase does proceed to settlement, then the completed property is considered to have been acquired for CGT purposes at the time (and in the income year) in which the original contract was signed – and not in the year of settlement.

And this has some important practical consequences.

The first is that for the purposes of accessing the 50% CGT discount (in the case where the property does not become your CGT-exempt home), you are taken to have acquired the property when the off-the-plan contract was signed.

And this gives you ample time to satisfy the 12-month holding rule – including where you may even sell the property within 12 months after settlement of the contract.

Secondly, and importantly, any capital gain or loss will arise in the income year in which you enter the sale contract (eg, the 2023 income year) and not in the income year that you settle that contract (eg, the 2025 income year). And this is the case even if, as is not uncommon, this contract of sale is entered into before the original off-the-plan purchase is even settled.

In short, as long as the contract is settled, the key date for determining when property is acquired (or disposed of) is the date (ie, the income year) the contract is entered into – regardless of whether settlement takes place in the next income year or in a later income year.

This means that the income year in which any capital gain or loss is returned on the sale of the property is the income year in which you enter the off-the-plan contract – even though the settlement does not take place until another income year.

However, in this case the Commissioner has a generous policy so that the taxpayer does not have to immediately return any gain in that income year – but only once the proceeds on settlement are received. And then they can go make and amend that prior year return accordingly.

Also, in the case where the off-plan purchase is to become your home, the requirement of the “building concession” must be met in order for the property to eventually be considered your CGT-exempt home. 

Finally, it is important to understand that the CGT rules that apply in off-the-plan purchases are different from those that apply to an option agreement – which instead is treated a separate legal transaction with separate CGT consequences. It is only if the option is exercised that the transaction is merged into one transaction and the CGT rules then apply in a different way.

How the sandwich generation can cope financially

Many Australians are finding themselves part of the “sandwich generation” – adults who are juggling the demands of raising their own children while also caring for ageing parents. It’s a tough spot to be in, emotionally and financially.

Whether you’re still working and trying to build your own wealth, or you’ve recently retired and expected to finally enjoy some freedom, the reality of being pulled in both directions can stretch your time, energy and finances.

What is the sandwich generation?

The sandwich generation refers to people – often in their 40s, 50s or even 60s – who are “sandwiched” between caring for their children (sometimes adult children still living at home) and their elderly parents who may need help with transport, health care or day-to-day support.

This role often comes without warning. A parent might suddenly fall ill. A child may lose a job or return home after a breakup. Suddenly, you’re responsible for more than just your own needs.

The financial impact

Caring for others takes a toll on your finances. If you’re still working, you might reduce your hours, knock back a promotion, or even leave work altogether to support a parent – especially if they want to stay at home rather than go into aged care.

This can mean:

Even if you’ve already retired, your resources may be stretched. That overseas holiday you dreamed of might be replaced with fuel costs for daily visits to mum or dad, or paying for carers and medication out of your own pocket.

Some adult children even dip into their own retirement savings to cover costs, which can leave them short down the track.

What you can do

While everyone’s situation is different, here are a few tips to help you manage:

  1. Talk about money early – it might feel awkward, but open conversations with your parents (and children) about finances are essential. 

Find out:

The sooner you understand the financial picture, the easier it is to make a plan.

  1. Get help navigating aged care – the aged care system can be complex. If your parent needs more support, it’s worth getting advice to understand what services and payments are available.

You might be surprised by how much help is out there, including subsidised in-home care or respite services to give you a break.

  1. Look after your own future – it’s natural to want to help your family, but don’t forget your own needs. If you’re still working, keep your super contributions going if possible. If you’re retired, review your budget and spending regularly to avoid running out of funds too soon.
  2. Ask for support – don’t try to do it all alone. Speak to siblings about sharing the load, reach out to community organisations, and lean on your GP or counsellor if you’re feeling burnt out. You can’t pour from an empty cup.

Need help?

If you’re feeling the financial squeeze of being in the sandwich generation, we’re here to help. Whether it’s budgeting, retirement planning, or navigating aged care options, contact us for guidance tailored to your situation. A good plan can make a big difference. 

SMSF: A suitable path to retirement control?

Self-Managed Super Funds (SMSFs) are a key part of Australia’s superannuation system, offering control over retirement savings. As of March 2025, about 650,000 SMSFs manage $1 trillion in assets – a quarter of the $4.1 trillion superannuation pool. Let’s take a quick look at who uses SMSFs, why they’re chosen, costs and setup essentials for those considering this option.

Who uses SMSFs?

SMSFs attract people who want to manage their retirement funds. As of March 2025, there are around 1.2 million SMSF members. About 68% of funds have two members (often couples), 25% have one member, and 7% have three to six members. Most members (85%) are over 45, with the average member holding over $800,000 in assets.

Why choose an SMSF?

The main appeal of an SMSF is control. Unlike industry or retail funds, SMSF members act as trustees, tailoring their investment strategies. This allows investments in assets like real estate, cryptocurrencies, or unlisted assets, often unavailable elsewhere. 

SMSFs also offer transparency and tax benefits. For example, trustees can time when they sell assets and realise profits. SMSFs also provide flexibility in estate planning with bespoke binding death benefit nominations not ordinarily offered by large super funds.

Setting up and ongoing administration

Creating an SMSF involves some paperwork but is manageable with clear steps. Working with an SMSF professional can make the process smoother and ensure everything is set up correctly.

Here’s how to get started:

Costs involved

SMSFs can involve significant administrative work and be time-consuming to manage. Professional advice and administration can increase expenses but reduce workload. Keep in mind that insurance premiums, such as life or disability cover, are typically higher in SMSFs as they do not benefit from bulk discount arrangements. Trustees can lower costs by handling some administration, requiring time and expertise.

Is an SMSF right for you?

SMSFs offer control and flexibility, ideal for those with financial literacy, time, and larger balances, as lower balances may not justify the associated costs. However, they also come with responsibilities, including the risk of potential investment losses and the need to meet compliance obligations. If you’re considering an SMSF and want to understand more about how they work, feel free to give us a call – we can help you explore whether it might be a suitable structure for your needs. 

The great wealth transfer: Are you ready?

Over the next few decades, Australia is expected to witness one of the biggest intergenerational wealth transfers in history with between $3.5 trillion and $5 trillion changing hands as baby boomers pass on their wealth to children and grandchildren.

If you’re expecting to inherit from your parents or grandparents, or you’re thinking about the legacy you’ll leave to your loved ones, it’s important to understand the tax traps and planning strategies that come with this enormous transfer of wealth. While there’s no inheritance tax in Australia, there are other hidden tax pitfalls that can reduce the value of what’s passed down.

The tax traps you should know

Capital gains tax (CGT)

Receiving cash doesn’t attract tax but inheriting property, shares or other investments can trigger capital gains tax (CGT), depending on how and when those assets are sold. For example, if you inherit a home and it’s sold within two years of the deceased’s passing, the sale may be exempt from CGT – provided the home was the person’s main residence.

If you keep the property for longer or it was being used to produce income, CGT could apply down the track when you sell.

Superannuation

Super is another area full of complexity. When someone inherits super, whether or not they pay tax on it depends on a few things – like who they are and how the money is paid.

If the person receiving the super is a “tax dependent” – for example, a spouse or a child under 18 – they usually won’t have to pay any tax if the super is paid as a lump sum.

However, if the person inheriting the super death benefit isn’t a tax dependent (such as an adult child), your super fund will withhold tax before paying the money out. This can range from 17% to 32% (including Medicare levy), depending on the type of contributions that were made to your account (eg, concessional or non-concessional contributions).

Getting advice about how super is structured and who your beneficiaries are can make a big difference in how much tax is paid.

Gifting assets before death

Some people choose to give assets like property or shares to their children while they’re still alive – either to help them out financially or to reduce the size of their estate. While this can be a thoughtful move, it can also lead to an unexpected tax bill.

That’s because giving away certain assets (like an investment property or shares) is treated like selling them, which means CGT may apply. The tax is worked out based on the difference between what the asset is worth now and what you originally paid for it.

However, if the person giving the gift has made a loss on other investments in the past, they may be able to use those losses to cancel out some or all of the gain, reducing or even eliminating the tax they have to pay. 

This is why it’s important to get advice before making any big gifts – so you know exactly what the tax consequences might be.

Trusts and family structures

Using a family trust or testamentary trust (a trust set up under a will) can offer flexibility and tax savings. These structures allow more control over who receives income and when – which can help manage tax across the family group and avoid disputes. But they need to be set up correctly and in line with your wishes.

Tips to protect your family’s wealth

  1. Get your will and estate plan in order – having a legally binding will is the foundation of a good wealth transfer plan. It’s also wise to appoint a power of attorney and an executor who understands your wishes and has the emotional and practical ability to carry them out.
  2. Talk openly with your family – the emotional side of inheritance is just as important as the financial side. Discuss your intentions early to avoid surprises and prevent family conflict down the line.
  3. Understand the tax implications – don’t assume everything passes tax-free. Ask questions about CGT, super and gifting – especially if you’re likely to inherit property, shares or other non-cash assets.
  4. Review your super nominations – make sure your beneficiaries are up to date and that you’ve completed the right type of nomination form (binding vs non-binding). This helps ensure your super goes where you want it to, without unnecessary tax or delay.
  5. Seek professional help – the rules are complex, and mistakes can be costly. Getting the right advice from a professional who understands estate planning and tax can help you make smarter decisions and keep more money within your family unit.

Need help planning or receiving an inheritance?

Whether you’re planning your legacy or expecting to receive one, we can help you navigate the rules, reduce the tax and protect what matters most.