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Superannuation Reform: Non Concessional Contributions


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From 1 July 2017, the annual Non Concessional Contributions cap will be reduced from $180,000 to $100,000 per year. A new restriction is also introduced such that an individual with a total Superannuation balance of $1.6 million or more at 30 June of the previous Financial Year will no longer be eligible to make Non Concessional Contributions.

Bring Forward Rule
 

If you are under age 65 at any time during a financial year, you may be able to make Non Concessional Contributions of up to three times your non-concessional contributions limit over a three-year period (subject to the Eligibility Threshold). This is known as the 3 Year Bring Forward Rule.

From the 1 July 2017, if you trigger the 3 Bring Forward Rule by making a Non Concessional Contribution amount exceeding the reduced annual limit of $100,000 in that year, you cannot exceed $300,000 over the three-year period.

Bring Forward Rule - Transitional Arrangements:
 

If you trigger 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 will apply so that the amount of the bring forward cap will reflect the reduced annual contributions cap.

If you trigger 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 trigger 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 is 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

 
 
An Example

Barney currently has a superannuation balance of $500,000 and makes 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 triggers 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 triggers 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).

From 1 July 2017, as the cap has been lowered, 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.

Eligibility Threshold
 

From 1 July 2017, if your total super balance is above $1.6 million at 30 June of the previous year, you will no longer be eligible to make Non Concessional Contributions. Where your balance is close to $1.6 million, you can only make a contribution or use the bring forward rule to take your balance to $1.6 million but not beyond.

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

 
 
Age under 65 on 1 July

If you are under 65 years old, there is capacity to bring forward one or two years 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. If your balance is close to $1.6 million, you will only be able to bring forward the annual cap amount for the number of years that would take your balance to $1.6 million.

Example 1:

Assume you have a total superannuation balance of $200,000 at 30 June 2017 and are 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.

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 3 Year 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.

 
 
Age between 65 and 74

The Bring Forward Rule is not available to you if you are between 65 and 74 years old. You can make Non Concessional Contributions of up to $100,000 per annum provided you meet the work test and your total superannuation balances at 30 June of the previous financial year is less than $1.6 million.

Example:

Assume you have a total superannuation balance of $1.45 million at 30 June 2017 and are aged 65 on 1 July 2017. Given you are aged over 65, the Bring Forward Rule is not available to you and therefore, you can make a Non Concessional Contribution of up to $100,000 in the 2018 Financial Year if you pass the work test in that Financial Year.

Seek Professional Advice from a Financial Adviser
 

This package of Superannuation Reforms involves complex changes which may affect your retirement plans. The situation is even more complex if you have superannuation benefits in multiple Superfunds. This is because all the thresholds and caps apply to are total superannuation balance, not your balance in each individual Superfund.

ESUPERFUND is a no advice model and does not provide financial advice to clients. We recommend that you seek professional advice from a financial adviser. A licensed financial adviser will consider your personal situation and make a recommendation suitable to your particular financial needs.

It should always be remembered that Trustees are legally responsible for all the decisions made even if you obtain advice from a Financial Planner. Whilst a Financial Professional can provide advice and assistance you are ultimately responsible for the Fund.