Super Reform: The Latest On Non-Concessional Contributions
From 1 July 2017 there are changes to non-concessional (post tax) contributions. The contribution cap will drop to $100,000 per year and non-concessional contributions will be restricted if your total super balance exceeds $1.6 million. Further, the bring forward of non-concessional contributions will still be allowed under age 65, however, transitional measures will apply.
Reduced non-concessional contributions cap
From 1 July 2017 the annual non-concessional contributions cap will drop to $100,000 (four times the annual concessional contribution cap).
There is no change to the non-concessional contribution cap of $180,000 in 2016/17.
Eligibility to contribute
To make a non-concessional contribution from 1 July 2017 you must:
- be under age 65
- be age 65 to 74 and meet a work test (gainfully employed for at least 40 hours over a 30-day consecutive period in the year of contribution)
- have a total super balance under the transfer balance cap of $1.6 million on 30 June of the previous year (this is a new requirement from 1 July 2017)
Bring-forward of non-concessional contribution caps
The bring forward rule allows those under age 65 at any time during the financial year to bring forward up to two years of future non-concessional contributions. As a result, the non-concessional contribution cap from 1 July 2017, the bring forward limit will drop to $300,000.
The current bring forward limit of $540,000 applies in 2016/17. If this is not fully utilised by 30 June 2017 a reduced non-concessional contribution cap will be calculated from 1 July 2017.
Bring-forward rule — transitional arrangements
Transitional arrangements will apply if you have made a non-concessional contribution in either the 2015/16 or 2016/17 year that triggers the bring-forward provisions. The bring forward rule is triggered if a non-concessional contribution is made that exceeds the standard contribution cap for that year.
The remaining amount of the bring-forward limit available will reflect the reduced annual non-concessional contribution caps effective from 2017/18.
Where the non-concessional contribution bring-forward was triggered in 2015/16, the transitional cap will be $460,000 (this includes the annual contribution cap of $180,000 in 2015/16 and 2016/17, along with the cap of $100,000 in 2017/18). Alternatively, if you triggered the bring forward provisions in 2016/17 (but the $540,000 limit is not fully utilised in this year), the transitional cap will be $380,000 (includes the $180,000 contribution cap from 2016/17 and $100,000 cap for each 2017/18 and 2018/19).
Adjustment to bring forward rule
The amount of non-concessional contributions you can bring forward will depend on your super balance at 30 June the previous financial year. Individuals with balances close to $1.6 million will only be able to access the number of years of bring-forward non-concessional contributions that would increase their superannuation balance up to $1.6 million. This is illustrated in the table below, applicable for 2017/18:
|Total superannuation balance at 30 June 2017||Contribution and bring forward available|
|Less than $1.3 million||3 years ($300,000)|
|Between $1.3 and $1.4 million||3 years ($300,000)|
|Between $1.4 and $1.5 million||2 years ($200,000)|
|Between $1.5 and $1.6 million||1 year ($100,000)|
Source: Australian Government, Superannuation Fact Sheet 04, 17 October 2016.
It is likely you may need to wait for your end of year superannuation statements to ascertain your total super balance as at the previous 30 June.
- Example Jacob’s total superannuation balance at 30 June 2017 is $1.54 million. As his total superannuation balance is over $1.5 million but less than $1.6 million, he is only able to make $100,000 of non-concessional contributions in the 2017/18 year.
- Example Jack (age 47) triggered the bring-forward rule in 2015/16 by making a $320,000 non-concessional contribution. He does not make any non-concessional contributions in 2016/17.
On 1 July 2017, his new bring-forward cap is recalculated to be $460,000 (to factor in the reduced non-concessional contribution cap of $100,000 for the 2017/18 year).
As Jack has already contributed $320,000 during the bring-forward period, his remaining non-concessional cap for the 2017/18 year will be recalculated as $140,000.
- Example Mary (age 50) triggered the bring-forward rule in 2016/17 by making a $250,000 non-concessional contribution.
On 1 July 2017, her new bring-forward cap is recalculated to be $380,000 (to factor in the reduced non-concessional cap of $100,000 for the 2017/18 and 2018/19 years).
As Mary has already contributed $250,000, her remaining non-concessional cap for the remainder of the bring-forward period is recalculated as $130,000.
The ability to use the bring forward contribution limits is retested each year against your super balance as at 30 June of the previous year. So even though you may not fully utilise the full bring forward cap, this may be reduced to nil if your super balance subsequently exceeds $1.6 million.
Depending on when the bring-forward rule is invoked this timing will result in bring forward limit of $540,000, $460,000 or $380,000.
Frank Paul is Chief Operating Officer & Head of Advice Services with Spring Financial Group. Frank has over 20 years' experience in financial planning and investment advisory.
|Frank has extensive experience in private client advising and the management of financial services operations. Frank is actively involved in the recruitment and management of advisory personnel and heads the advisory panel. He holds a Master of Commerce (Financial Planning) and a Dip. Financial Planning and has authored literally dozens of financial education publications.|