The recent and significant changes to the superannuation Non Concessional Contribution cap from 1 July 2017 has largely impacted the ‘Bring Forward Rule’ if the Bring Forward Rule was triggered prior to 1 July 2017; specifically in the 2015/16 or 2016/17 financial years.
For example, if an individual contributed $250,000 as a Non Concessional Contribution in the 2016/2017 financial year, they would have exceeded the $180,000 Non-Concessional Contribution cap by $70,000 and therefore triggered the Bring Forward Rule. By doing so, they have brought forward the next two financial years’ worth of contribution caps.
The Bring Forward Rule allows an individual to bring forward up to two financial years’ worth of the Non Concessional Contribution cap, effectively permitting you to contribute up to three years worth of the cap over a 3 year period, disregarding the annual cap in each of those financial years.
Prior to the reduction of the Non Concessional Contribution cap down to $100,000 p.a. (from 1 July 2017), it was easy to calculate how much an individual could contribute over a 3-year period. It was simply three times the $180,000 cap (i.e. $540,000). The same process applies if the Non-Concessional Contribution cap is triggered after 1 July 2017 – an individual can contribute three times the $100,000 Non Concessional Contribution cap over a 3-year period (i.e. $300,000) while disregarding the annual cap in each year.
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Be careful utilising the Bring Forward Rule for those nearing age 65. See below.
Also, keep in mind no additional Non-Concessional Contributions are able to be made by individuals with superannuation balances exceeding $1.6 million.
But what about those in the transition phase. What is the maximum that can be contributed to superannuation as a Non Concessional Contribution for individuals who triggered the Bring Forward Rule in the 2015/2016 or 2016/17 financial years?
Transitional Bring Forward Rule 2017/2018
If you triggered the superannuation Non Concessional Contribution Bring Forward Rule in either the 2015/16 or 2016/17 financial years, your Bring Forward Non Concessional Contribution cap will be affected by the recent reduction in the annual Non Concessional Contribution cap commencing on 1 July 2017. From 1 July 2017, the Non Concessional Contribution cap will be $100,000 p.a.
The table below details how your trigger of the Bring Forward Rule will be treated and what you are permitted to contribute from 1 July 2017 onward. (source: Superannuation Fact Sheet 4):
|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 $180k but less than $380k||Cannot exceed $380k from 2016-17 to 2018-19||End of transition period $100k or 3yr bring forward|
For example, if you make a contribution to access the bring forward rule in 2016-17, the bring forward amount available in later years is $380,000 (see example 1 and 2). If you made a contribution in the 2015-16 financial year, the bring forward amount will be $460,000 (see example 3).
Bring Forward Rule Over Age 65
While the Bring Forward Rule is able to be triggered by someone in the financial year that they reach age 63, 64 or 65, they will need to meet the superannuation work test for contributions made after reaching age 65. Generally, once an individual reaches age 65, the Bring Forward Rule is unable to be utilised and the maximum amount that can be contributed is the annual Non Concessional Contribution cap. However, the Bring Forward Rule can be triggered in the financial year that a person reaches age 65 – even after they reach 65, but you will need to satisfy the work test if the contribution is made after age 65.
The superannuation work test requires you to work at least 40 hours over a 30 consecutive day period within the financial year that the contribution is made and BEFORE the contribution is made.
Non Concessional Contributions are unable to be made by individuals over the age of 75. A valid contribution must be made by an individual aged 74 must be received by the super fund within 28 days of the end of the month in which the individual turns 75 or it cannot be accepted.