In recent weeks the government announced that Australians aged 65 and 66 (to be specific, under the age of 67 at the start of the tax year), would be able to make up to three years of non-concessional super contributions under bring-forward rules. Previously, bring-forward rules only applied to those under age 65.
Below we explain what non-concessional contributions are, where bring-forward rules come into it, why this could be good news for you and what other rules have changed for this age group in recent times.
What are non-concessional contributions?
Non-concessional contributions are voluntary contributions you can make using after-tax dollars (such as when you transfer funds from your bank account into your super), which you don’t claim a tax deduction for.
Currently, the annual non-concessional contributions cap is $110,000.
Apart from non-concessional contributions, there are also concessional contributions and limits to the amount of both types of contributions you can make each year.
What are the bring-forward rules?
The bring-forward rules apply to non-concessional contributions only.
These rules allow you to make up to three years of non-concessional contributions in a single income year, if you’re eligible. This means you can put in up to three times the annual cap of $110,000, which means you may be able to top up your super by $330,000 within the same financial year.
However, how much you can make as a non-concessional contribution will depend on your total super balance as at 30 June of the previous financial year. More on this below.
How could the bring-forward rules benefit me?
If you’ve reached your concessional contributions cap, received an inheritance, or have money from the sale of a large asset, non-concessional contributions may be a good way to top up your super.
However, contribution caps limit the amount you’re able to put into super in a single year, which is where bring-forward rules may be helpful, as they could allow you to make a much larger non-concessional contribution, or more non-concessional contributions, than you’d otherwise be able to make in 12 months.
How does my total super balance cap affect bring-forward rules?
Your total super balance may impact your ability to contribute up to three years of non-concessional contributions under the bring-forward rules.
Currently, your total super balance must be below $1.48 million, as at 30 June of the previous financial year, for you to be able to contribute up to three years of annual caps ($330,000) under the bring-forward rules.
If your total super balance rises above this level, your ability to bring forward future year caps may be reduced, or no longer available at all, meaning only the standard annual cap (or no cap at all) may be available.
See the table below to get an idea of what you may be able to contribute under the bring forward rules.
What other things should I be across?
If you exceed super contribution caps, additional tax and penalties may apply. The value of your investment in super can also go up and down, so before making extra contributions, make sure you understand, and are comfortable with, any potential risks.
If you have any questions about the changes to the super bring-forward rule, or any other recent changes, please contact us today.
©AWM Services Pty Ltd. First published July 2021