Receiving an excess non-concessional contributions [NCC] notice from the ATO is painful. Under the Income Tax Assessment Act 1997, contributions exceeding the non-concessional cap can attract harsh tax consequences.

 

3 options after receiving this notice

 

1. do nothing and pay the tax

If a client chooses to take no action in response to the notice, they will be subject to excess non-concessional contributions tax at the top marginal tax rate, currently 47% on the excess amount.

 

2. elect to release the excess contributions

A more common approach is to elect to have the excess released from the superannuation fund. In this case, 85% of the excess amount is returned to the client.

However, the sting lies in the associated earnings component, which is calculated by the ATO using a deemed rate of return, currently set at the General Interest Charge [GIC] rate. This is 8.75% p.a. [as at Q1 2025], which is significantly higher than most real-world investment returns.

The associated earnings amount is included in the client’s assessable income and taxed at their marginal tax rate, potentially increasing their tax liability significantly.

 

3. apply to disregard or reallocate the contribution – Section 292-465

The third option, and the main focus of this blog, is to apply to the ATO under section 292-465 to disregard the excess contribution or reallocate it to a different financial year.

 

applying to disregard excess contributions

 

Important note: Clients have 60 days from the date of receiving the excess non-concessional contributions notice to make an application under section 292-465. The request must be submitted using the approved form [ATO Form NAT 71333].

If your client is undecided about which option to pursue, it’s essential to advise them of this deadline early to preserve their right to apply for the Commissioner’s discretion.

To succeed in this application, the client must demonstrate that ‘special circumstances’ exist, and that making the determination is consistent with the object of Division 292, which is to limit the amount of non-concessional contributions a person can make over their lifetime.

The ATO’s views on what qualifies as special circumstances are outlined in Law Administration Practice Statement PS LA 2008/1 and Tax Determination TD 2013/22.

In general, special circumstances refer to something unusual, unexpected or outside taxpayers’ control.

 

what doesn’t qualify as special circumstances:

  • Simply forgetting the contribution cap.
  • A deliberate contribution made with knowledge of the cap.
  • Poor financial planning or failing to seek advice.

 

what may qualify as special circumstances:

  • An employer making a non-concessional contribution on the employee’s behalf without their knowledge.
  • A superannuation fund processing a contribution in the wrong financial year due to an administrative error outside the control of the member.
  • Delays in contribution processing caused by banking system errors or natural disasters.

 

let’s put it into action

 

Consider a client who intends to fully utilise their three-year bring-forward rule and contributes $360,000 in the current financial year.

Unbeknownst to them, their employer also makes a non-concessional contribution (for example, under a bonus deferral or share scheme arrangement), pushing them over the cap.

This may provide grounds for a section 292-465 application, but success is not guaranteed.

The client would need to demonstrate:

  • That they were genuinely unaware of the employer’s contribution.
  • That they could not have reasonably foreseen or prevented excess.
  • That they acted promptly and in good faith upon discovering the issue.

Ultimately, the matter is at the ATO’s discretion, and as practitioners well know, that discretion can be difficult to predict.

 

final thoughts

 

While the release option is often the most straightforward path, applying under section 292-465 may be the most equitable option where a contribution has clearly occurred outside of the client’s control.

That said, the threshold is high, and applications need to be supported by evidence and a detailed explanation.

 

we’re here to help you [and your clients]

If you need guidance on the best way to help your clients, our legal team is ready to help. Contact us at legal@businessdepot.com.au or call 1300BDEPOT to speak to one of our experts

 

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General advice disclaimer 
The information provided in this article is a brief overview of the subject matter and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however, information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision and should consult an appropriate professional before making any decision.