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Edited version of private ruling

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Ruling

Subject: Non-Concessional Contributions

Question 1

Can you contribute more than $150,000 into your superannuation fund and avoid excess non-concessional contributions tax through the use of the bring forward provision?

Answer

Yes.

Question 2

Can you contribute additional amounts after you reach 65 years of age into your superannuation fund, up to the $450,000 cap accessible through the use of the bring forward provision?

Answer

No.

This ruling applies for the following periods:

1 July 2010 to 30 June 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are under 65 years of age

You intend to retire at a future date.

You intend to contribute more than $150,000 into your superannuation fund once you retire.

You intend to contribute additional amounts into your superannuation fund in later years, after you reach 65 years of age.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 292-85

Income Tax Assessment Act 1997 subsection 292-85(2)

Income Tax Assessment Act 1997 paragraph 292-85(2)(c)

Income Tax Assessment Act 1997 subsection 292-85(3)

Income Tax Assessment Act 1997 subsection 292-85(4)

Superannuation Industry (Supervision) Regulations 1994 subregulation 7.01(3)

Superannuation Industry (Supervision) Regulations 1994 regulation 7.04

Superannuation Industry (Supervision) Regulations 1994 subregulation 7.04(1)

Reasons for decision

Summary

You can contribute more than $150,000 into your superannuation fund and take advantage of the non-concessional contributions cap bring forward provision prior to turning 65 years of age even if you are no longer working.

However, you can not contribute any additional amounts into your superannuation fund after you have turned 65 years of age and are no longer working.

Detailed reasoning

From 1 July 2007, a person can contribute up to three times their non-concessional contributions cap and avoid excess non-concessional contributions tax through the 'bring forward provision' prescribed in subsection 292-85(4) of the Income Tax Assessment Act 1997 (ITAA 1997). Provided that a person was under 65 years of age at any point in the income year and that they have not triggered the operation of the provision in the prior two years the bring forward provision will automatically trigger.

Non-concessional contributions cap

Section 292-85 of the ITAA 1997 defines the non-concessional contributions cap amount. This cap is the amount that a person can contribute up to, before being subject to excess non-concessional contributions tax.

Paragraph 292-85(2)(c) of the ITAA 1997 states for the 2009-10 or later financial year the
non-concessional contributions cap amount is six times the concessional contributions cap.

Subsection 292-85(3) of the ITAA 1997 states that:

Subsection (4) applies instead of subsection (2) in determining your non-concessional contributions cap for a financial year (the first year) if:

The bring forward provision automatically triggers for a person who is under 65 years of age at any time of the year, where they have not triggered the operation of the provision in the previous two years.

A person who turns 65 in any of the following two years will still be eligible for the provision.

Subsection 292-85(4) of the ITAA 1997 states:

Work out your non-concessional contributions cap for the first year and the following two financial years (the second year and third year) as follows:

Your cap for the third year is;

The bring forward provision allows a person to bring forward the next two years non-concessional contributions cap for use in the first year. Over the remaining two financial years the remaining cap shortfall can be contributed without being subject to excess non-concessional contributions tax.

The purpose of the bring forward provision is to allow a person to contribute more than their standard non-concessional contributions cap in one financial year and not be subject to the excess non-concessional contributions tax. For a person to contribute any amount of superannuation contributions they still need to satisfy any acceptance criteria.

As you will be under 65 years of age at any time of the 2010-11 financial year you will be eligible for the bring forward provision and can therefore contribute up to the applicable cap amount provided that you satisfy the acceptance criteria prescribed below.

Acceptance of contributions

Under the Superannuation Industry (Supervision) Regulations 1994 (SISR), restrictions have been placed on superannuation contributions for persons over 65 years of age.

Regulation 7.04 of the SISR states that a regulated superannuation fund may accept contributions only in accordance with the table contained subregulation (1) and subregulation (2), (3), (4) and (6).

Item 2 of the table in subregulation (1) states:

If the member is not under 65, but is under 70 the fund may accept:

For a superannuation fund to accept contributions for a person between the age of 65 and 70, the contribution can only be the 9% superannuation guarantee, unless that person is gainfully employed on at least a part time basis.

For the purpose of contribution restrictions, gainfully employed has the meaning given by subregulation 7.01(3) of the SISR. Subregulation 7.01(3) states that a person will be gainfully employed on at least a part time basis if they are employed, for gain or reward, for more than 40 hours in a 30 day period.

You plan to retire by the time you reach 65 years of age. Your superannuation fund will be able to accept non-concessional contributions up until you reach 65 years of age regardless of whether you are working or not, however they will not be able to accept any non-concessional contributions after you reach 65 years of age and do not meet the work test prescribed above.

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