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Non Concessional Contributions - Aged Under 65


 
 
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

The $1.6 million eligibility Threshold was introduced from 1 July 2017. If you have a total superannuation balance of $1.6 million or more on 30 June of the previous Financial Year you are not eligible 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, the Non Concessional Contributions limit for a given Financial Year is as follows:

Income Year Amount of cap
2017-18 $100,000 per member per annum
2016–17 $180,000 per member per annum
2015–16 $180,000 per member per annum

 
 
Bring Forward Rule

If you are under age 65 at any time during a Financial Year, there is capacity to bring forward one or two years' worth of Non Concessional Contributions (i.e. $200,000 cap over two years or $300,000 cap over three years) depending on your total superannuation balance on 30 June of the previous Financial Year. There is no requirement to elect to use the Bring Forward Rule. It is automatically triggered in the first Financial Year in which a Non Concessional Contribution exceeds the annual limit.

It should be noted that Individuals with balances close to $1.6 million are only able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.

The following table sets out the bring forward cap and bring forward period depending on the individual's total superannuation balance on 30 June of the previous financial year:

Superannuation Balance
on 30 June
Contribution and
bring forward available
Less than $1.3 million 3 years ($300,000)
$1.3 - $1.4 million 3 years ($300,000)
$1.4 - $1.5 million 2 years ($200,000)
$1.5 - $1.6 million 1 year ($100,000)
$1.6 million Nil

Example 1:

Assume you have a total superannuation balance of $200,000 at 30 June 2017 and aged under 65 on 1 July 2017. This enables you to use the Bring Forward Rule over 3 years without exceeding the Contribution Limits. Therefore, you can make Non Concessional Contribution of up to $300,000 during the 2018, 2019 and 2020 Financial Years.

In this case, the Bring Forward rule expires at the end of the 2020 Financial Year.

Example 2:

You are aged under 65 on 1 July 2017 but have a total superannuation balance of $1.45 million at 30 June 2017. This means that you cannot access the full three year bring forward as this would take your balance over $1.6 million. You can only make a Non Concessional Contribution of up to $200,000 during the 2018 Financial Year.

Example 3:

Assume you have a total Superannuation Balance of $1.39 million at 30 June 2017 and are aged under 65 on 1 July 2017 (and therefore eligible for the Bring Forward Rule). You make a Non-Concessional Contribution of $100,000 in the 2018 Financial Year. This means you will have a remaining bring forward cap of $200,000 which can be made in the next two years.

However, your total superannuation balance on 30 June 2018 has increased to $1.63 million (due to growth in Asset Values). This means you cannot make any further Non Concessional Contributions during the 2019 Financial Year even if you have not fully used up the $200,000 remaining bring forward cap.

 
 
Bring Forward Rule - Transitional Arrangements:

If you triggered the 3 Year Bring Forward Rule during the 2015/16 or the 2016/17 Financial years but have not used it fully by 30 June 2017 (i.e. you did not contribute $540,000 by 30 June 2017), transitional arrangements apply so that the amount of the bring forward cap will reflect the reduced annual contributions cap.

If you triggered the 3-year bring forward rule in 2015/16, the transitional cap will be $460,000 (the annual cap of $180,000 for 2015/16 and 2016/17 and the $100,000 cap for 2017/18).

If you triggered the 3-year bring forward rule in 2016/17, the transitional cap will be $380,000 (the annual cap of $180,000 for 2016/17 and $100,000 cap for 2017/18 and 2018/19).

The following table sets out the bring forward caps depending on when the bring forward rule was triggered:

2015-16 2016-17 2017-18 2018-19 2019-20
More than $460,000 Nil End of Transition period $100,000 or 3 year bring forward -
More than $180,000 but less than $460,000 Cannot exceed $460,000 from 2015-16 to 2017-18 End of Transition period $100,000 or 3 year bring forward -
- More than $380,000 Nil Nil End of Transition period $100,000 or 3 year bring forward
- More than $180,000 but less than $380,000 Cannot exceed $380,000 from 2016-17 to 2018-19 End of Transition period $100,000 or 3 year bring forward

 
 
Transitional Arrangement - An Example:

Barney made the following non-concessional contributions into his SMSF:

  2015 - 2016
Contribution
2016 - 2017
Contribution
2017 - 2018
Contribution
2018 - 2019
Contribution
2019 - 2020
Contribution
Age on 1 July Age 61 Age 62 Age 63 Age 64 Age 65
Example 1 $200,000 $150,000 $110,000(a) $300,000 under Bring Forward Rule(a) Nil
Example 2   $200,000 $90,000(a) $90,000(a) $100,000(a)(b)

Note (a): Assume Barney meets the Eligibility Threshold each Financial Year to make the Non Concessional Contributions.
Note (b): Assume Barney passes the work test after turning 65

Example 1

In Example 1, Barney triggered the "3 year bring forward rule" in the 2016 Financial year by contributing $200,000 in December 2015. Therefore, the transitional bring forward cap of $460,000 applies to him (calculated as $180,000 cap for 2016 and 2017 Financial Years and $100,000 for 2018 Financial Year).

To remain within the lowered "3 year bring forward rule" limit, Barney must ensure that his Non Concessional Contributions for the 2016, 2017 and 2018 Financial Years do not exceed $460,000

The 3 year bring forward rule expires at the end of the 2018 Financial Year and given Barney is under 65 on 1 July 2018, he can contribute up to $300,000 in the 2019 Financial Year.

Example 2

In Example 2, Barney triggered the "3 year bring forward rule" in the 2017 Financial year by contributing $200,000 in September 2016. Therefore, the transitional bring forward cap of $380,000 applies to him (calculated as $180,000 cap for 2017 and $100,000 for 2018 & 2019 Financial Years). As the cap has been lowered from 1 July 2017, Barney can only make a further non-concessional contribution of up to $180,000 in the next 2 years. Barney makes a further non-concessional contribution of $90,000 in 2017/18 and $90,000 in 2018/19. The 3 year bring forward rule expires at the end of the 2019 Financial Year.

Given Barney is 65 on 1 July 2019, he is no longer eligible for the "3 year bring forward rule" and can contribute up to $100,000 in the 2020 Financial Year provided Barney passes the work test and subject to the $1.6 million eligibility threshold.

 
 
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 Transaction Bank Account

All Non Concessional Contributions must be deposited into the Transaction Bank Account established for your SMSF. There is only one Transaction Bank Account established for your SMSF and all Members must deposit Contributions into the same Transaction Bank Account. It is unnecessary and administratively inefficient to have a separate Transaction Bank 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 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, the ATO will ask you to choose how your Excess Non Concessional Contributions are taxed after the lodgement of your SMSF Annual Return. You have the following options:

Option 1 Release amounts from SMSF

If you choose this option, you are electing to withdraw all your Excess Non Concessional Contributions and 85% of associated earnings from your SMSF. In this case, the Excess Non Concessional Contributions will NOT be subject to Excess Non Concessional Contributions tax. However the full amount of associated earnings is added to your assessable income and taxed at you marginal tax rates subject to a 15% tax offset.

Option 2 Pay Excess Non Concessional Contributions tax on the excess amount

If you choose not to release your Excess Non Concessional Contributions from your SMSF, the Excess Contributions over the Non Concessional Contribution Limit will be subject to Excess Contributions Tax at the highest marginal tax rate of 49%.

Excess Contributions Tax can result in double taxation, with an effective tax rate of up to 98%! To avoid this disastrous situation, it is vital that you keep track of all your Non Concessional Contributions.