The ability to bring-forward up to 3 years’ worth of non-concessional contributions will be retained. The current requirement that taxpayers be less than age 65 at any time during the first year of the 3 year bring-forward period will be maintained.
Currently, the maximum bring-forward amount is $540,000. From 1 July 2017, the maximum bring-forward amount will be reduced to $300,000. It seems (at least to us) that if the 3 year “bring-forward period” straddles 1 July 2017, then the maximum bring-forward will be determined by aggregating the non-concessional contributions cap which applies to each of the 3 years of the “bring-forward period”.
Situation 1 – Financial Years 2015/16, 2016/17 and 2017/18
In this example, 2 financial years occur before 1 July 2017 and one financial year occurs after 30 June 2017. The relevant caps for each financial year are $180,000 (15/16); $180,000 (16/17) and $100,000 (17/18). Consequently, the maximum bring-forward will be $460,000. However, this will be subject to a special transitional arrangement – which is discussed below.
Situation 2 – Financial Years 2016/17, 2017/18 and 2018/19
In this situation, one financial year occurs before 1 July 2017 and the other 2 financial years occur after 30 June 2017. The relevant caps for each financial year are $180,000 (16/17); $100,000 (17/18) and $100,000 (18/19). Consequently, the maximum bring-forward will be $380,000. However, this will be subject to a special transitional arrangement – which is discussed below.
The factsheet for the $1.6m threshold provides the example of “Molly”.
Molly’s superannuation balance at 1 July 2016 is $200,000 and she is aged 40. In respect of 2016/17 financial year she contributes $250,000. This contribution exceeds $180,000 (the relevant non-concessional cap for the 2016/17 financial year), consequently, Molly has triggered the “bring-forward” of non-concessional contributions. The first year of the 3 year “bring-forward period” is 2016/17. The maximum bring-forward amount is $380,000. As she has contributed $250,000 in the first year, she can contribute up to $130,000 over the second and third years of the “bring-forward” period.
In the example, Molly contributes $110,000 in the second year (i.e. 2017/18) and contributes $20,000 in the third year (i.e. 2018/19). Consequently Molly has exhausted her “bring-forward” cap and cannot make any further non-concessional contributions for the 3 years of the “bring-forward period”. In Molly’s case the “bring-forward cap” will be reset for the 2019/20 financial year.
Situation 3 – Financial Years 2017/18, 2018/19 and 2019/20
In this example, all 3 financial years occur after 30 June 2017 and the non-concessional contributions cap for each of the financial years is $100,000. Consequently, the maximum bring-forward will be $300,000.
Three year bring-forward which straddle 1 July 2017 – Special transitional rules
It seems special transitional rules will apply where a “bring-forward” period straddles 1 July 2017.
The first special rule is that if the bring-forward can be completed by 30 June 2017, then the $540,000 cap will apply.
The second special transitional rule is that if the bring-forward is not completed by 30 June 2017, then the maximum amount of non-concessional contributions which can be made in 2017/18 and 2018/19 will be limited to the unused portion of the maximum bring-forward amount.
These special transitional rules are illustrated in the following examples. It is assumed that other requirements for a bring-forward are satisfied (eg. under age 65 and superannuation balance less than $1.6m). The first year of the “bring-forward period” is 2016/17.
Example 1
Bill decides to make a $540,000 non-concessional contribution in May 2017. If Bill is able to make the contribution in its entirety before 1 July 2017, then the contribution can be made and retained by the fund.
Example 2
Bert, unfortunately, cannot make the entire $540,000 contribution before 1 July 2017. He has made a non-concessional contribution of $400,000 before 1 July 2017. While the $400,000 can be retained by the fund (as it is within the non-concessional cap which applies for 2016/17), Bert has lost the opportunity of making any further non-concessional contributions in the 2017/18 or 2018/19 financial years. This follows as Bert’s maximum bring-forward amount for the 3 year period 2016/17-2018/19 is $380,000. As he has exceeded that amount before 1 July 2017, the entire amount can be retained by the fund (because it is within the non-concessional contribution cap which applied for 2016/17).
Example 3
Dagobert has been able to only make a $325,000 non-concessional contribution before 1 July 2017. As this amount is less than the maximum bring-forward amount for the 3 year period commencing 1 July 2016 (which is $380,000), he can make further non-concessional contributions in the financial years 2017/18 and 2018/19 totalling $55,000 (which is the shortfall between the actual amount contributed and Dagobert’s maximum bring-forward amount).
Comments: The above examples are based upon our understanding of underlying principles. Two significant points need to be made. First, there is a last opportunity to make a $540,000 non-concessional contribution before 1 July 2017. This will apply if the taxpayer has not triggered a “bring-forward” in 2014/15, 2015/16 or 2016/17 and is under age 65 at any time during the 2016/17 financial year. In this situation, the taxpayer can make a $540,000 non-concessional contribution irrespective of their current superannuation balance. The only condition is that the entire contribution must be made before 1 July 2017.
The second, is that by triggering a “bring-forward” in 2016/17 does not preserve any portion of the $540,000 which is unpaid by 1 July 2017 and which exceeds $380,000 (being the actual bring-forward amount applying to the 3 year period commencing 1 July 2016).
Interaction between the “bring-forward” and the $1.6m non-concessional contribution threshold
The interaction between the “bring-forward” of contributions and the excess non-concessional contribution threshold is illustrated in an example which has been taken from the factsheet issued as part of the Press Release for the super changes.
Eamon has a total superannuation balance of $1.45m on 30 June 2018. He can make non-concessional contributions in 2018/19 as the $1.6m threshold has not been reached. He could make a $100,000 concessional contribution.
As Eamon is under age 65, he is permitted to make use of the “bring-forward”. Normally, the maximum bring-forward amount would be $300,000 (as each financial year of the “bring-forward period” occurs after 30 June 2016). However, Eamon is restricted to only $200,000.
The restriction arises because the first $100,000 will be treated as increasing his superannuation balance to $1.55m – which is still under the $1.6m non-concessional contributions threshold.
The second $100,000 can be made as Eamon’s superannuation balance (notionally adjusted for the first $100,000) is still under $1.6m threshold.
The third $100,000 cannot be made as Eamon’s superannuation balance (notionally adjusted for the first and second contributions) exceeds the $1.6m threshold.
Comments: It is easy to state that the taxpayer must have a superannuation balance of less than $1.6m, however it is a very different thing to actually determine whether this will be the case. The superannuation balance is a global balance of all the taxpayers’ superannuation interests including those interests which are in pension phase.
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