Non-concessional contributions are contributions for which no tax deduction has been claimed (that is, they are after-tax contributions). Currently, the cap for non-concessional contributions is $180,000 per annum. Taxpayers under 65 years of age can also access the 3 year bring forward rule which enables them to make a contribution of 3 x the cap (that is, 3 x $180,000 or $540,000) in one year (and then no further contributions for the next 2 years).
From 1 July 2017, the annual cap for non-concessional contributions will be reduced to $100,000 for taxpayers with total superannuation account balances of less than $1.6 million.
Members with total superannuation account balances of $1.6 million or more will not be able to make any non-concessional contributions.
3 year bring forward rule
Access to the 3 year bring forward provisions also depends on the total superannuation account balance of the member as at 30 June of the previous financial year:
Taxpayers with a total superannuation account balance of less than $1.4 million – can access the full 3 year bring forward provisions and make a non-concessional contribution of $300,000 in one year and no further non-concessional contributions in the next 2 years.
Taxpayers with a superannuation account balance between $1.4 million and $1.5 million – can only bring forward 2 years of non-concessional contributions ($200,000)
Taxpayers with an account balance between $1.5 million and $1.6 million – can only make the annual non-concessional contribution ($100,000)
Taxpayers with an account balance over $1.6 million – cannot make any non-concessional contributions.
Further, if a member has triggered the 3 year bring forward provisions during the 2015/16 or 2016/17 years and didn’t fully utilise the bring forward cap before 1 July 2017, the bring-forward cap will be subject to transitional rules.
Other considerations for making non-concessional contributions
If you are aged between 65 and 74, you must satisfy a work test in order to make superannuation contributions (that is, you must be gainfully employed for more than 40 hours over a 30 consecutive day period). If you are 75 or older, you cannot make voluntary superannuation contributions.
Members with an account balance in excess of $1.6 million need to be careful not to inadvertently make a non-concessional contribution. This can occur in a number of ways, for example:
Paying expenses on behalf of the superannuation fund with private funds;
Exceeding the concessional contributions cap.
Members looking to make substantial non-concessional contribution will need to plan the manner in which they do this to ensure they stay within the relevant caps. For example, taxpayers may wish to take advantage of the 3 year bring forward rules during the 2016-17 financial year which will enable them to contribute $540,000 (whereas the same cap in the 2017-18 financial year will only enable the to contribute $300,000).
Call us today on 56656469 if you would like to discuss how these changes may apply to you.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent,
Jeanette has over 20 years experience as an accountant in public practice. She is a Chartered Accountant, registered tax agent and accredited SMSF Association advisor. When she is not helping business owners grow their empires, you will likely find her out running on the trails or lifting weights in her local CrossFit gym. Book in to see Jeanette today.