Non Concessional Contributions

Personal Contributions made into a SMSF from after tax income on which no tax deduction is claimed are known as Non Concessional Contributions.  Non Concessional Contributions are essentially personal contributions made into your SMSF from your own personal Bank Account and not from your Employer.

Eligibility to make Non Concessional Contributions

If you are under age 65 you do not need to pass a Work Test to make a Non Concessional Contribution into your SMSF.

Maximum Non Concessional Contributions Allowed

If you are under age 65, a limit of $150,000 per annum per Member applies for Non Concessional Contributions made into your SMSF.

3 Year Bring Forward Rule

If you are under age 65 at any time during a financial year you are permitted to bring forward two years' worth of Non Concessional Contributions.  This enables you to contribute any amount up to $450,000 in total over three years without exceeding the Contribution Limits.  This is known as the "3 Year Bring Forward Rule".  There is no requirement to elect to use the "3 Year Bring Forward Rule".  It is automatically triggered in the first financial year in which a Non Concessional Contribution exceeds the $150,000 limit, noting that you cannot exceed $450,000 in that year and the next 2 years.  The "3 Year Bring Forward Rule" resets at the expiration of the 3 year period, allowing the Member to continue making contributions to the SMSF.

3 Year Bring Forward Rule:  An Example

Barney is 60 and makes a Non Concessional Contribution to his SMSF in the 2011 financial year totaling $200,000.  Barney will trigger the "3 Year Bring Forward Rule" because he has made a Non Concessional Contribution exceeding $150,000 in that year.  Therefore to remain within the "3 Year Bring Forward Rule" limit, Barney must ensure that his Non Concessional Contributions for the 2011, 2012 and 2013 Financial Years do not exceed $450,000.  Given Barney has already made a Non Concessional Contribution of $200,000, his total Non Concessional Contribution limit for the next 2 years should not exceed $250,000 (ie $450,000 less $200,000).  Consider some options available to Barney below. 

Please note that in the above examples the "3 year Bring Forward Rule" expires at the end of the 2013 financial year allowing Barney to contribute up to $450,000 again in the 2014 year as he will be under 65 on 1 July 2013 (ie the commencement of the 2014 financial year).

No Tax on Non Concessional Contributions

No tax is ever payable on a Non Concessional Contribution made into a SMSF either when the monies are contributed into the SMSF or when monies are accessed later on at retirement.

All Non Concessional Contributions are made into the ANZ V2 Plus Account

All Non Concessional Contributions must be deposited into the ANZ V2 Plus Account established for your SMSF.  There is only one ANZ V2 Plus Account established for your SMSF and all Members must deposit Contributions into the same ANZ V2 Plus Account.  It is unnecessary and administratively inefficient to have a separate ANZ V2 Account for each Member.

How ESUPERFUND tracks Non Concessional Contributions

Each Contribution and Contribution Type must be allocated to a specific Member as part of the annual compliance process.  This is a legal requirement.  Typically the Member making the Contribution and the Contribution Type will be detailed on the ANZ V2 Plus Bank Statement.  To the extent that the narration on the Bank Statement is insufficient, you will be asked to confirm on whose behalf the contributions have been made and the Contribution Type using an annual checklist we send to all SMSF clients each year in July.  You do not need to send us confirmation at the time each Non Concessional Contribution is made. This information is only required annually and we will guide you through the process and prompt you when information is required from you.  For more visit our Q&A section here.

Excess Non Concessional Contributions

To the extent you make a Non Concessional Contribution exceeding your Non Concessional Contribution Limit your SMSF must return the excess contribution to the contributing Member within 30 days of receiving the contribution.  To the extent that this does not occur your SMSF will be liable for Excess Contributions Tax.  Excess Contributions over the Non Concessional Contribution Limit will be subject to Excess Contributions Tax of 46.50%.  This can result in double taxation, with an effective tax rate of 93%!   To avoid this disastrous situation it is vital that you keep track of all your Non Concessional Contributions.