Edited version of your written advice

Authorisation Number: 1012782910143

Advice

Subject: Non-concessional contributions

Question

Are you able to make non-concessional superannuation contributions in the 2014-15 financial year of up to $540,000 without exceeding your non-concessional contributions cap for that financial year?

Advice

Yes.

This advice applies for the following period:

Financial year ending 30 June 2015

The arrangement commences on:

1 July 2014

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out 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.

You were under 65 years on 1 July 2014.

You are an employee in the 2014-15 financial year.

You do not expect to exceed your concessional contributions cap for the 2014-15 financial year.

You have not exceeded your non-concessional contributions cap for the 2012-13 or 2013-14 financial years.

You applied for a private ruling asking the Commissioner to confirm that you are able to make non-concessional superannuation contributions of up to $540,000 anytime during the 2014-15 financial year, without exceeding your non-concessional contributions cap for that year.

Relevant legislative provisions

Taxation Administration Act 1953 Section 357-55 of Schedule 1

Taxation Administration Act 1953 Paragraph 357-55(a) of Schedule 1

Taxation Administration Act 1953 Section 359-5 of Schedule 1

Income Tax Assessment Act 1997 Subsection 291-20(2)

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 Section 292-90

Income Tax Assessment Act 1997 Subsection 995-1(1)

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 7.04(1)

Reasons for decision

Summary

The Commissioner is unable to make a private ruling on issues relating to excess non-concessional contributions and excess non-concessional contributions tax because non-concessional contributions tax is not a tax assessed under the Income Tax Assessment Act 1997 (ITAA 1997).

However, in the interests of sound administration, the Commissioner provides the following administratively binding advice in relation to these issues and in response to the question you have raised.

You can contribute non-concessional contributions totalling $540,000 anytime in the 2014-15 financial year, without exceeding your non-concessional contributions cap for that financial year.

Detailed reasoning

Administratively binding advice

Section 359-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that the Commissioner may, on application, make a written ruling (a private ruling) on the way in which a relevant provision applies, or would apply, to an entity in relation to a specified scheme.

For the purposes of section 359-5 of Schedule 1 to the TAA, the relevant provisions are defined in section 357-55 of Schedule 1 to the TAA and include certain provisions of Acts and regulations of which the Commissioner has general administration. However, none of the paragraphs in section 357-55 allow a private ruling to be given in relation to excess non-concessional contributions or excess non-concessional contributions tax.

Paragraph 357-55(a) of Schedule 1 to the TAA does allow a ruling to be given on 'tax' however, in accordance with subsection 995-1(1) of the ITAA 1997, 'tax' means:

a) income tax imposed by the Income Tax Act 1986 as assessed under this Act; or

b) income tax imposed as such by any other Act, as assessed under this Act.

Excess non-concessional contributions tax is assessed under the Superannuation (Excess Non-concessional Contributions Tax) Act 2007 (S(ENCCT)A) and not the ITAA 1997. As such, it is not a 'tax' for the purposes of section 357-55 of Schedule 1 to the TAA. Therefore, the Commissioner cannot make a ruling on issues relating to excess non-concessional contributions or excess non-concessional contributions tax.

In the interests of sound administration, the Commissioner will however, provide administratively binding advice in relation to these issues and in response to the question you have raised.

Administratively binding advice is not legally binding on the Commissioner. When the time comes to assess liability to tax, the law as it then exists must be applied to the facts as established at that time. However, the ATO will stand by what is said in such advice and will not depart from it unless:

• there have been legislative changes since the advice was given

• a tribunal or court decision has affected our interpretation of the law since the advice was given, or

• for other reasons, the advice is no longer considered appropriate. For example, if the advice has been exploited in an abusive and unintended way.

Non-concessional contributions

Non-concessional contributions are defined in section 292-90 of the ITAA 1997 and include certain contributions and amounts that are not included in the assessable income of a complying superannuation fund. Generally, non-concessional contributions include personal contributions for which an income tax deduction is not claimed, spouse contributions and excess concessional contributions.

Non-concessional contributions made to a complying superannuation fund are subject to an annual cap. In accordance with section 292-80 of the ITAA 1997, non-concessional contributions in excess of the relevant cap amount for the financial year, are subject to excess non-concessional contributions tax at the rate of 47% (section 5 the S(ENCCT)A).

A person has excess non-concessional contributions for a financial year if the amount of the person's non-concessional contributions for the year exceeds the person's non-concessional contributions cap for the year (section 292-85 of the ITAA 1997). For the 2009-10 or a later financial year, a person's non-concessional contributions cap for the year is an amount equal to six times the concessional contributions cap for the year (subsection 292-85(2) of the ITAA 1997).

Concessional contributions cap is defined in subsection 291-20(2) of the ITAA 1997 and for the purposes of calculating the non-concessional contributions cap for the 2014-15 financial year, the cap is set at $30,000. Therefore, the non-concessional contributions cap for the 2014-15 financial year is $180,000.

Financial year is defined in subsection 995-1(1) of the ITAA 1997 as a period of 12 months beginning on 1 July.

As a concession, to accommodate larger contributions, individuals under the age of 65 years in a financial year, are able to bring forward future entitlements to two years' worth of non-concessional contributions. This is known as the 'bring forward' option. This means that in the 2014-15 financial year a person under 65 years, can contribute non-concessional contributions of up to $540,000 over three financial years, without exceeding their non-concessional contributions cap (subsections 292-85(3) and (4) of the ITAA 1997).

The 'bring forward' provision will be triggered automatically when non-concessional contributions in excess of the annual cap are made in a financial year by an individual who is under the age of 65, at any time in the first year, where a bring forward has not already commenced.

On 1 July 2014, you were under 65 years and, as stated in your correspondence, you intend to contribute non-concessional contributions of $540,000 during the 2014-15 financial year. As your total non-concessional contributions for the 2014-15 financial year will exceed the non-concessional contributions cap for the financial year, the bring forward provision will be automatically triggered to allow you the additional two years' worth of non-concessional contributions (that is, an additional $360,000) to be made in the 2014-15 financial year. The 'bring forward' provision will therefore apply for the 2015-16 and the 2016-17 financial years.

Therefore, you can contribute non-concessional contributions totalling $540,000 anytime in the 2014-15 financial year without exceeding your non-concessional contributions cap for that financial year.

Other relevant comments

Alternatively, as raised in your correspondence, you can contribute non-concessional contributions of $180,000 for the 2014-15, 2015-16 and 2016-17 financial years without exceeding your non-concessional contributions cap for each of the relevant financial years.

It is important to note however, that whilst you may be able to contribute $180,000 in the 2014-15, 2015-16 and 2016-17 financial years without exceeding your non-concessional contributions cap for that financial year, consideration must be given as to whether your superannuation fund will be able to accept your member contributions if they are contributed in the 2015-16 and 2016-17 financial years, after you turn 65 years.

Conditions under which a regulated superannuation fund is able to accept contributions are set by the Superannuation Industry (Supervision) Act 1993 and the corresponding Superannuation Industry (Supervision) Regulations 1994 (SISR).

Under subregulation 7.04(1) of the SISR, a regulated fund may accept member contributions (non-concessional contributions) made by an individual who is not under 65, but is under 70 years, only if the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made.

Subregulation 1.03(1) of the SISR defines 'gainfully employed' and 'part-time' to mean employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment, for at least 10 hours, and less than 30 hours each week.

Whether an individual has been gainfully employed, is known as the 'work test'. Where a member who is 65 or more and under age 70, does not satisfy the work test, the fund must not accept personal (non-concessional) contributions in respect of the member.

Therefore, based on the facts of your case, if you make any contributions in the 2015-16 or 2016-17 financial year, on or after you turn 65, you will need to ensure that you satisfy the 'work test'.

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