Utilising up to three years of caps in a single year
Note: As part of its 2021-22 Budget, the Federal Government announced significant changes to the eligibility rules around non-concessional contributions. From 1 July 2022, the Government will allow individuals aged 67 to 74 (inclusive) to make or receive non-concessional super contributions or salary sacrificed contributions without meeting the ‘work test’, subject to contribution caps. It is anticipated that these individuals will also be able to access the non-concessional bring-forward arrangement explained in this article. In the meantime, the aged based eligibility provisions incuded below continue to apply, but any contribution strategies need to be planned in the context of the proposed changes.
Non-concessional contributions – the basics
Non-concessional contributions (NCCs) refer to money you put into your super fund using after-tax dollars and don’t claim a tax deduction on. Some people choose to make non-concessional contributions when they’ve reached their yearly concessional (before tax) contribution cap.
There are limits on how much you can contribute each year. For NCCs, the cap is currently set at $100,000. This is four times the annual concessional (before-tax) contribution cap.
An opportunity to utilise future caps
Under the ‘bring-forward’ arrangement, members who are under 67 at any time in the financial year may effectively bring-forward up to two years’ worth of non-concessional caps. This means the member can contribute a greater amount (ie up to $300,000 in 2020-2021) without exceeding their NCC cap.
The rules, including eligibility (especially for members approaching age 67), can be complicated. Here we give a simple overview of how the bring-forward rules work. If you’re thinking of utilising the bring-forward rules, you should speak with your super fund before making any decisions.
For the 2020-2021 financial year, the number of years’ worth of NCCs that may be brought forward (either one or two) is determined by the member’s total super balance as at 30 June 2020. The table below illustrates.
Total super balance at 30 June 2020
|Standard NCC cap 2020-2021||Allowable number of years bring-forward||Max NCC for 2020-2021 including bring forward|
|Less than $1.4M||$100,000||2 x $100,000||$300,000|
|$1.4M to less than $1.5M||$100,000||1 x $100,000||$200,000|
|$1.5M to less than $1.6M||$100,000||Nil||$100,000|
|$1.6M or more||Nil||Nil||Nil|
If maximum contributions are brought forward into the current financial year, the person will not be able to make further non-concessional contributions during the bring‑forward period.
The NCC caps apply on a “use it or lose it” basis and the bring-forward rule is not retrospective. This means that if you have not made NCCs for several years in the past, this cannot be added to your NCC limit for the current financial year.
The bring-forward rule is triggered automatically once NCCs in excess of $100,000 are made in a single financial year. You are not required to make an election, or complete any specific paperwork.
Members approaching age 67
The bring-forward rule can’t be utilised by those who are aged 67 or over. The maximum amount an individual aged 67 or over can contribute is $100,000 per annum.
Members aged 65 or 66 during 2020-2021 may use the bring-forward rule regardless of their intentions for future gainful employment or retirement from the age of 67. For example, a person aged 66 can still trigger the bring-forward rule and make an NCC of $300,000 in the current financial year, even though they may not be able to make contributions in the subsequent two years of the ‘bring-forward period’, once they have turned 67.
However, it is important to understand that a member must be eligible to make NCCs each time a contribution is made. Things get more complicated where a member turns 67 in the financial year.
Where a member triggers the ‘bring-forward rule’ in the financial year that they reach age 67, the timing of the NCCs contributions will be determined by whether they have met the “work test” during the financial year. If the work test has not been met, the member can only make contributions (and therefore trigger the ‘bring-forward rule’) prior to reaching age 67. If, however, the work test has been met, the member can trigger the ‘bring-forward rule’ by making after tax contributions at any time during the financial year in which they reach 67 (including contributions made after their 67th birthday).
A simple example
Bronwyn is 53 years old and has a total super balance of $900,000.
In 2020-2021, Bronwyn makes non-concessional contributions which total $200,000. As this exceeds the NCC cap of $100,000, the bring-forward rule is triggered automatically, allowing Bronwyn to bring over the contributions cap for the next two years (2021-2022 and 2022-2023).
However, as the current cap for a three-year period is only $300,000, in the next two years Bronwyn can only contribute up to $100,000 to stay within the cap. If she contributes more than $100,000, she will then be liable for the excess contribution tax on the excess amount.
If Bronwyn wants to contribute more than $100,000 then she would need to wait until Year 4 (2023-2024) when the bring-forward is reset, and she can contribute more into her super.
Boost your super and claim a tax deduction by making a personal tax-deductible contribution
Catch-up on any unused concessional (before-tax) contribution caps from the previous two years using the ‘carry-forward’ provisions.
Help grow your partner’s super savings and claim a tax offset for yourself using the spouse contributions tax offset
If you’re a low- to middle-income earner and make an after-tax contributon you might be eligible
See if you’re eligible for the federal government’s low income super tax offset
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