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Edited version of administratively binding advice
Authorisation Number: 1012470498394
Advice
Subject: Non-concessional contributions
Question
Did non-concessional contributions made by you in the 2011-12 income year trigger the bring forward provisions under subsection 295-85(4) of the Income Tax Assessment Act 1997?
Advice:
Yes
This advice applies for the following period:
Year ending 30 June 2013
The arrangement commences on:
1 July 2012
Relevant facts and circumstances
You were under 65 years of age in the 2011-12 income year.
You are currently over 65 years of age and no longer working.
You are a member of a complying superannuation fund (the Fund).
During the 2011-12 income year, you made voluntary personal non-concessional contributions in excess of the non-concessional contributions cap to the Fund.
You advised that you haven't triggered the bring-forward provisions in either the 2009-10 or 2010-11 income years.
You also advised that you met the work test in both the 2011-12 and 2012-13 income years.
You propose to make further personal contributions of up to $450,000 to the Fund at any time up to 30 June 2013.
You are not intending to claim a tax deduction in respect of your personal superannuation contributions.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-80.
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 Section 292-410.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 4.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 5.
Superannuation Industry (Supervision) Regulations 1994 Subregulation 1.03(1).
Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.01(3).
Reasons for decision
Summary
As you have made non-concessional contributions in excess of the non-concessional contributions cap to a complying superannuation fund in the 2011-12 income year, you have triggered the bring-forward provisions. Consequently, you can make further personal contributions of up to $450,000 in the 2012-13 income year without being liable for excess contributions tax.
Detailed Reasoning
Non-concessional contributions cap
Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For a person who is 50 years of age or more their non-concessional contributions cap for the 2011-12 and 2012-13 income years is $150,000.
Non-concessional contributions include:
Ÿ personal contributions for which an income tax deduction is not claimed;
Ÿ contributions a person's spouse makes to their superannuation fund account; and
Ÿ transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income).
Some contributions are specifically excluded from being non-concessional contributions. These include:
Ÿ a Government co-contribution;
Ÿ a contribution arising from a structured settlement or an order for personal injury;
Ÿ a contribution relating to some capital gains tax (CGT) small business concessions to the extent that it does not exceed the CGT cap amount ($1,000,000 indexed annually) when it is made; and
Ÿ a roll-over superannuation benefit.
A person will have a liability to pay excess non-concessional contributions tax at the rate of 46.5% if they have excess non-concessional contributions for an income year (subsection 292-80 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007). A person will be required to ask their superannuation fund to release an amount that is equal to the tax liability (section 292-410 of the ITAA 1997).
The Bring Forward Provisions
As a concession, to accommodate larger contributions, taxpayers under age 65 in an income year are able to bring forward future entitlements to two years worth of non-concessional contributions.
For a person who is 50 years of age or more their transitional concessional contribution cap for the 2011-12 and 2012-13 income years is $50,000 and their non-concessional contributions cap is $150,000.
However, subsections 292-85(3) and (4) of the ITAA 1997 ('the bring-forward provisions') provide that the non-concessional contributions cap is calculated differently if certain conditions are satisfied.
Subsection 292-85(3) of the ITAA 1997 states:
However, subsection (4) applies instead of subsection (2) in determining your non-concessional contributions cap for a financial year (the first year) if:
(a) your non-concessional contributions for the first year exceed the amount mentioned in subsection (2) for that year; and
(b) you are under 65 years at any time in the first year; and
(c) a previous operation of subsection (4) does not determine your non-concessional contributions cap for the first year.
Therefore, a person who is under 65 years of age at any time during the income year who makes non-concessional contributions that exceed the non-concessional contributions cap specified under subsection 292-85(2) of the ITAA 1997, would trigger the bring-forward provisions and their non-concessional cap would be calculated in accordance with subsection 292-85(4) of the ITAA 1997.
Proposed non-concessional contributions to be made in the 2012-13 income year
During the 2011-12 income year you made a non-concessional contribution of more than $150,000, which resulted in the contribution exceeding the non-concessional contributions cap of $150,000 for that income year.
As you were under 65 year of age in the 2011-12 income year and the bring-forward provisions under subsection 292-85(3) of the ITAA 1997 had not already commenced, this contribution automatically triggered the bring-forward provisions.
This means you can make contributions totalling no more than $450,000 in the 2011-12 to 2013-14 income years without exceeding your non-concessional contributions cap.
Alternatively, if your contributions in the 2011-12 and 2012-13 income years totals $450,000, you will be unable to make further non-concessional contribution for the 2013-14 income year without exceeding your non-concessional contribution cap.
Other relevant comments
Conditions of Accepting Contributions
Rules on wether a regulated superannuation fund is able to accept contributions is determined under the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 (SISR).
'Work test'
Item 1 of the table under subregulation 7.04(1) of the SISR states that if the member is under age 65, the fund may accept contributions made in respect of the member.
However, under subregulation 7.04(2) of the SISR where the member is between age 65 and age 70, they must be gainfully employed on at least a part-time basis during the income year in order for a superannuation fund to be able to accept contributions from that member. To meet this requirement, the member must be gainfully employed for a least 40 hours in a period of not more than 30 consecutive days in that income year. This is generally referred to as the 'work test'.
'Gainfully employed' means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment (subregulation 1.03(1) of the SISR). The concept of 'gain or reward' envisages receipt of remuneration such as salary or wages, business income, bonuses, commissions, fees or gratuities, in return for personal exertion. It does not encompass a person who is only receiving passive income (e.g. trust distributions, dividends).
Consequently, if you do not work for at least 40 hours in a period of not more than 30 consecutive days during the 2013-14 or later income years, a complying superannuation fund will not be able to accept your contributions.
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