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Non Concessional Contributions - Aged Under 65


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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

After 1 July 2017 - $1.6 million Eligibility Threshold

From 1 July 2017, the $1.6 million eligibility Threshold is introduced. If you have a total superannuation balance of $1.6 million or more on 30 June of the previous Financial Year you will not be eligible to make Non Concessional Contributions.

 
 
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 – Before 1 July 2017

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 the bring-forward cap over three years without exceeding the Contribution Limits. The bring-forward cap is three times the non-concessional contributions limit of the first year. 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 annual limit.

If you trigger the "3 Year Bring Forward Rule" in a Financial Year by making non-concessional contributions exceeding the annual limit of $180,000 in that year, you cannot exceed $540,000 over the three-year period. 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.

Importantly it should be noted that if you trigger the 3 Year Bring Forward Rule in the 2015/2016 or 2016/17 Financial Year but have not used it fully by 30 June 2017, transitional rules will apply. The remaining bring forward cap will be reassessed on 1 July 2017 to reflect the new contributions cap. For more on the Transitional Rules click here.

 
 
3 Year Bring Forward Rule (before 1 July 2017):  An Example

Barney is 60 and makes a Non Concessional Contribution to his SMSF in the 2015 financial year totalling $200,000.  Barney will trigger the "3 Year Bring Forward Rule" because he has made a Non Concessional Contribution exceeding $180,000 in that year.  Therefore to remain within the "3 Year Bring Forward Rule" limit, Barney must ensure that his Non Concessional Contributions for the 2015, 2016 and 2017 Financial Years do not exceed $540,000.  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 $340,000 (i.e. $540,000 less $200,000).  Consider some options available to Barney below. 

Example 2015
Contribution
Age 60
2016
Contribution
Age 61
2017
Contribution
Age 62
Total
Contribution
1 $200,000 $340,000 $0 $540,000
2 $200,000 $75,000 $265,000 $540,000
3 $200,000 $100,000 $240,000 $540,000

Please note that in the above examples the "3 year Bring Forward Rule" expires at the end of the 2017 financial year.

 
 
Bring Forward Rule - After 1 July 2017

The lowering of Non Concessional contribution cap to $100,000 per annum and the introduction of the $1.6 million Eligibility Threshold affects the Bring Forward Rule from 1 July 2017.

If you trigger the bring forward rule after 1 July 2017 by making a Non Concessional Contribution exceeding the annual limit of $100,000 in that year, you may bring forward one to two years of Non Concessional Contributions (i.e. $200,000 cap over 2 years or $300,000 cap over 3 years depending on the individual’s total superannuation balance on 30 June of the previous Financial Year).

Individuals with balances close to $1.6 million will only be 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

For more details in relation to the Eligibility Threshold and the Bring Forward rule from 1 July 2017, click here.

 
 
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.