A technical expert for the sector has suggested breaching the concessional contributions cap can be useful to ensure an individual remains within the limits of their non-concessional cap to avoid the associated severe penalties.
Heffron SMSF technical and education services director Leigh Mansell demonstrated how this might work using an example where a fund member was looking to maximise both of his contributions caps to the cent.
The circumstances were such that the individual for the 2026 income year had employer contributions of $12,900.40 and so wanted to make a personal deductible contribution of $17,099.60 and a non-concessional contribution of $120,000 to completely exhaust the amount of money he can allocate to his fund without triggering the bring-forward rules.
However, Mansell pointed out the ATO does not recognise cents in a notice of intent to claim a deduction for a personal contribution, meaning in this case $17,099 would be allocated to the member’s concessional contributions cap with $120,000.60 counting towards his non-concessional cap, which would in turn trigger the bring-forward provisions against the person’s wishes.
To prevent this scenario from playing out, she said advisers should encourage the member to claim a personal deductible contribution of $17,100 and a non-concessional contribution of $119,999.60.
“[It means] he hasn’t totally utilised his non-concessional contributions cap, but it’s only by 40 cents, [which is] immaterial. The critical thing is he’s not going to have more than $120,000 [of non-concessional contributions] so he won’t trigger the bring-forward [provision] a year too early,” she told delegates at the SMSF Association Technical Summit 2026 recently hosted in Sydney.
She recognised individuals may be hesitant to client take this course of action as it results in them having an excess concessional contribution.
“Is it illegal to have excess concessional contributions? No. So there is nothing wrong with having excess concessional contributions; it happens all the time. Maybe we just don’t see it that often when we’re dealing with someone claiming a deduction for personal contributions,” she said.
“So there is nothing illegal about having excess concessional contributions. It can be a useful tool sometimes to help you prevent having excess non-concessional contributions.”
She emphasised this outcome would be advantageous, given the costs involved with breaching the non-concessional contributions cap.
“If you don’t trigger the bring forward too early, you end up with excess non-concessional contributions. Don’t forget the cost of that will be earnings that will start to accrue from 1 July of the excess year right until the time the ATO issues the non-concessional contributions determination, which could be almost 18, 22, 23-odd months later.”
She said this would incur an interest charge of about 11 per cent for that period, resulting in a significant penalty.
By contrast, the member can always elect to release the offending amount of money when they receive an excess concessional contributions determination from the ATO.