One of the changes to the Australian superannuation system that commenced on 1 July 2017 was the modification of non-concessional contribution caps.
What are non-concessional contributions?
Non-concessional contributions are generally contributions made into your SMSF that are not included in the SMSF’s assessable income. The most common type is personal contributions made by the member for which no income tax deduction is claimed.
NCCs also include excess concessional contributions for the financial year. They do not include super co-contributions, structured settlements and orders for personal injury or capital gains tax (CGT) related payments that the member has validly elected to exclude from their non-concessional contributions.
If you have more than one super fund, all non-concessional contributions made to all of your funds are added together and counted towards the non-concessional contributions cap.
How has the non-concessional contributions cap changed?
From 1 July 2017, the annual non-concessional contribution cap reduced from $180.000 to $100,000 per year and this remains available to those aged between 65 and 74 years old if they meet the ‘work test’. (This test requires you to be gainfully employed, working at least 40 hours during a consecutive 30 day period each financial year in which the contributions are made.)
The non-concessional contributions cap is set at four times the concessional contributions cap ($25,000 for 2017-18) and will increase in line with the indexation of this.
Effective 1 July 2017, your non-concessional cap is nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6m in 2017-18) at the end of 30 June of the previous financial year. Total superannuation balance is made up of the balance of all your super and retirement saving accounts. As a result, if you make non-concessional contributions in that year, they are excess non-concessional contributions.
What is the ‘bring forward’ arrangement?
If under the age of 65, you may make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year by bringing forward your non-concessional contributions cap for a two or three year period. That is, when you make contributions greater than the annual cap, you automatically gain access to future year caps.
From 1 July 2017, the non-concessional contributions cap amount that you are able to bring forward will depend on your total superannuation balance at the end of 30 June of the previous financial year. To access the non-concessional bring-forward arrangement, you must be under 65 years of age for one day during the triggering year (the first year) and you must have a total superannuation balance of less than $1.5m at the end of 30 June 2017.
2017-18 bring forward period:
Total superannuation balance on 30 June 2017: Less than $1.4 million
Non-concessional contributions cap for the first year: $300,000
Bring forward period: 3 years
Total superannuation balance on 30 June 2017: $1.4 million to less than $1.5 million
Non-concessional contributions cap for the first year: $200,000
Bring forward period: 2 years
Total superannuation balance on 30 June 2017: $1.5 million to less than $1.6 million
Non-concessional contributions cap for the first year: $100,000
Bring forward period: No bring-forward period, the general non-concessional cap applies
Total superannuation balance on 30 June 2017: $1.6 million or more
Non-concessional contributions cap for the first year: Nil
Bring forward period: N/A