As of 1 July 2017, there is a significant reduction in the Non-Concessional Contribution cap compared to previous years. The reduction in the Non-Concessional Contribution cap is another measure aimed at reducing the effective tax concessions available for wealthier individuals.
A Non-Concessional Contribution is an after-tax contribution made into superannuation. Unlike a Concessional Contribution, a tax deduction cannot be claimed for a Non-Concessional Contribution. Non-Concessional Contributions form part of the ‘tax-free component‘ of your superannuation savings.
While a Non-Concessional Contribution does not provide any immediate tax deduction, all earnings within the superannuation environment are taxed at a maximum of 15%, which is usually lower than a person’s marginal tax rate, had the same amount been invested in an individual’s personal name.
The Non-Concessional Cap in the 2016/2017 financial year is $180,000; however will reduce to $100,000 p.a. from 1 July 2017.
|Financial Year||Non Concessional Cap|
Excess Contributions Tax applies to Excess Contributions.
Non-Concessional Contribution Cap 2017/2018 Bring Forward Rule
The Non-Concessional Contribution Cap Bring Forward Rule allows you to bring forward two years’ worth of the contribution cap – allowing you to contribute up to 3 times the annual cap amount at any stage over a 3-financial year period, while disregarding the annual cap in each year.
For example, as of 1 July 2017, the Non-Concessional Contribution cap is $100,000. Therefore, $300,000 can be contributed over a 3 year period at any stage. Some examples are shown in the table below:
|$150 000||$150 000||-|
|$180 000||-||$120 000|
|$110 000||$60 000||$130 000|
The Non-Concessional Contribution Bring Forward Rule is automatically triggered in a year that the annual Non-Concessional Contribution cap is exceeded.
You are only able to utilise the Bring Forward Rule in a financial year that you were aged 64 or lower for at least one day. As such, the Bring Forward Rule cannot be employed by a person aged 65 or higher for the full financial year.
Bring Forward Rule Transitional Caps
Some Non-Concessional Contribution transitional caps have been put in place to cater for the significant reduction in caps between the 2016/17 and 2017/18 financial years.
If the Bring Forward Rule was triggered in either the 2015/16 or 2016/17 financial years, the following Bring Forward Rule Transitional Caps will apply:
|More than $460K||Nil Contributions||End of transition period $100k or 3yr bring forward||-|
|More than $180K but less than $460k||Cannot exceed $460k from 2015-16 to 2017-18||End of transition period $100k or 3yr bring forward||-|
|-||More than $380k||Nil Contributions||Nil Contributions||End of transition period $100k or 3 yr bring forward|
|-||More than $80k but less than $380k||Cannot exceed $380k from 2016-17 to 2018-19||End of transition period $100k or 3yr bring forward|
Non-Concessional Contribution Cap Age Limit
Non-Concessional Contributions can be made by anyone under age 65 without restriction. If you are between 65 and 74, you are eligible to make Non-Concessional Contributions provided you meet the superannuation work test. The superannuation work test requires you to work at least 40 hours over a 30 consecutive day period prior to the contribution being made. Once you reach age 75, you are no longer able to make Non-Concessional Contributions into your superannuation account.
Non Concessional Contribution Maximum Balance
As of 1 July 2017, you are unable to make Non-Concessional Contributions to superannuation if your total superannuation balance (including pensions) exceeds $1.6 million.
Further, if your balance is greater than $1.6 million on 30 June of each year, your Bring Forward Rule cap is reduced to zero in the following year, as shown below (source ATO):
|Total Superannuation Balance||Contribution and Bring Forward Available|
|Less than $1.4M||Access to $300 000 cap (over 3 years)|
|Greater than or equal to $1.4M and less than $1.5M||Access to $200 000 cap (over 2 years)|
|Greater than or equal to $1.5M and less than $1.6M||Access to $100 000 cap (over 1 year)|
|Greater than or equal to $1.6M||Nil|
Tax on Non-Concessional Contributions
Non-Concessional Contributions enter your superannuation account completely tax free and are not included as assessable income to your superannuation fund. No Contributions Tax is payable on Non Concessional Contributions.
Non-Concessional Contributions also exit your superannuation/pension account tax free upon withdrawal. No tax is paid on the Non-Concessional (tax-free) component of your superannuation balance, regardless of whether it is paid to you as a recipient or paid to your nominated beneficiaries as a death benefit if you were to pass away.