1012593035333 | Legal database

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Edited version of administratively binding advice

Authorisation Number: 1012593035333

Advice

Subject: Non-concessional contributions cap - bring forward provision

Questions

1. Does the amount of $X, representing the after-tax amount of a genuine redundancy payment contributed to your superannuation fund, count towards your non-concessional contributions cap for the relevant income year?

2. If the payment of $X to your superannuation fund is a non-concessional contribution will the additional contribution of $Y trigger the bring forward provision under 292-85(4) of the Income Tax Assessment Act 1997?

3. Will an amount received under a will and then contributed to your superannuation fund, be a non-concessional contribution for the subsequent income year?

4. Can you make personal contributions of up to $450,000 in the 2015-16 income year without exceeding the non-concessional contributions cap where you reach age 65 in that income year?

Answers

1. Yes.

2. Yes

3. Yes

4. Yes

This advice applies for the following periods:

Year ended 30 June 2013.

Year ended 30 June 2014.

Year ended 30 June 2015

Year ended 30 June 2016.

The arrangement commences on:

1 July 2012.

Relevant facts and circumstances

Your advice is based on the facts below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

1. You will turn 65 years of age in the 2016 income year.

2. You have already and will continue to contribute to your superannuation fund; Statewide Super.

3. For the 2012-13 income year, you contributed $X (after tax) from your redundancy payment and another $Y (after tax) into your superannuation fund.

4. You will soon inherit approximately $Z which you would like to contribute to your superannuation fund.

5. You are considering contributions of up to $450,000 into your superannuation fund for the 2015-16 income year.

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 Subsection 292 85(3)

Income Tax Assessment Act 1997 Subsection 292 85(4)

Income Tax Assessment Act 1997 Subsection 292 90

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

Further issues for you to consider

None

Reasons for decision

Summary

1. The non-concessional contributions of $X and $Y you made to your superannuation fund during the relevant income year will activate the 'bring forward' provision making your new non-concessional contributions cap for the 20XX, 20YY and 20ZZ income years $450,000.

2. The inheritance you anticipate receiving and contributing to your superannuation fund will be a non-concessional contribution. If the contribution is approximately $Z and made during the subsequent income year, it will not breach your $450,000 non-concessional contributions cap for that year.

3. You can make personal contributions (non-concessional) of up to $450,000 in the 20VV income year as this will be 3 income years after the relevant year and the bring forward provision will be reset.

Detailed reasoning

Non-concessional contribution cap

4. Subdivision 292-C of the Income Tax Assessment Act 1997 (ITAA 1997) defines non-concessional contributions and sets liability to pay excess non-concessional contributions tax. Non-concessional contributions generally include after tax contributions to a superannuation fund for which you cannot claim a deduction. Under the Superannuation (Excess Non-concessional Contributions Tax) Act 2007, you will be taxed at 46.5% if you have excess non-concessional contributions for an income year.

5. According to paragraph 292-90(2)(a) of the ITAA 1997, non-concessional contribution caps apply to complying super funds. As your superannuation fund is a complying superannuation fund, the non-concessional contribution caps apply to you.

The bring-forward provision

6. The non-concessional cap for an income year is increased to three times the annual non-concessional cap if that annual non-concessional cap is exceeded by eligible taxpayers. Eligible taxpayers are those who are below 65 years of age on 1 July of the relevant income year.

7. Once the $150,000 non-concessional cap is breached in an income year, the cap for that year and the following two years is automatically increased to $450,000 (unindexed). This cap takes into account the initial contribution that led to the breach of the $150,000 cap.

8. As such, the second year cap is $450,000 less the non-concessional contributions made in the first year. It therefore follows that the non-concessional contribution cap for the third year is $450,000 less the non-concessional amounts in years one and two. The 'bring forward' provision can be activated every three years, however, is only available for persons under age 65 at 1 July in the relevant income year.

Non-concessional contributions for the 2012-13 income year

9. The non-concessional cap is $150,000 for the 2012-13 income year. As such, your contribution of $X (after tax) from your redundancy payment is below the non-concessional contributions cap.

10. An additional $Y (after tax) would bring the total contribution to approximately $X for the relevant income year. As this amount is greater than $150,000, it would trigger the bring forward provision under paragraph 292-85(4)(a) of the ITAA 1997. This means you will have a $450,000 cap over the three income years starting from 20XX, extending to the 20YY and 20ZZ income years.

Non-concessional contributions for the 2013-14 income year

11. The cap for the 2013-14 income year would be $A (the remaining amount of $450,000 less the sum of contributions $x and $Y). As the inheritance money is a non-concessional contribution, it is not excluded from the non-concessional contribution cap. However, a non-concessional contribution of $Z (your approximate inheritance) will be below the $A cap for 20YY income year.

Non-concessional contributions for the 2015-16 income year

12. Paragraph 292-90(3)(b) of the ITAA 1997 states that the bring forward provision only applies if "you are under 65 years at any time in the first year". Your date of birth is dd/mm/yyyy, and you will be 64 years old on 1 July 20ZZ. You will therefore be able to trigger the bring forward provision to increase your non-concessional cap to $450,000 for three income years starting from 20VV. If you make a contribution of $450,000 in the 20VV income year, you will reach the maximum non-concessional contribution cap.

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