Edited version of private ruling

Authorisation Number: 1011648515036

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Ruling

Subject: Non-concessional contributions cap - bring forward provisions

Question 1

Will you exceed the non-concessional contributions cap in the 2014-15, 2015-16 and 2016-17 income years?

Advice/Answers

Yes

This ruling applies for the following period

Year ending 30 June 2017

The scheme commenced on

1 July 2014

Relevant facts

You will make contributions to a complying superannuation fund.

In this case, you will trigger the bring forward provisions in the 2014-15 income year by making a contribution of X.

You plan to also contribute in the 2015-16 and 2016-17 income years.

You will meet the work test in the 2015-2016 and 2016-2017 income years.

Relevant legislative provisions

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)

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

Reasons for decision

Summary of decision

In this case, you will trigger the bring forward provisions in the 2014-15 income year by making a contribution of X, an amount over the non-concessional contributions cap. As you would have reached the unused bring forward amount in the 2014-15 income year you will not be able to make contributions without exceeding the non-concessional contributions cap in the following two years.

As you plan to also contribute in the 2015-16 and 2016-17 income years you will have made excess non-concessional contributions.

Detailed reasoning

Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap under subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997). For the 2010-11 income year the non-concessional contributions cap is $150,000.

Non-concessional contributions include:

· personal contributions for which an income tax deduction is not claimed;

· contributions a persons spouse makes to their superannuation fund account; and

· transfers from foreign superannuation fund's (excluding amounts included in the fund's assessable income).

Some contributions are specifically excluded from being non-concessional contributions. These include:

· a Government co-contribution;

· a contribution arising from a structured settlement or an order for personal injury;

· 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

· a roll-over superannuation benefit.

A taxpayer will be taxed on non-concessional contributions over the cap at the rate of 46.5% unless the bring forward provisions apply. The taxpayer will be required to ask their superannuation fund to release an amount that is equal to the tax liability.

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. This means a taxpayer under age 65 in the 2010-11 income year will be able to contribute non-concessional contributions totalling X over three income years without exceeding their non-concessional contributions cap (subsections 292-85(3) and 292-85(4) of the ITAA 1997).

The bring forward will be triggered automatically when contributions in excess of the annual non-concessional contributions cap are made in an income year by a taxpayer who is under age 65 at any time in the year where a bring forward has not already commenced (subsection 292-85(3) of the ITAA 1997).

Where a bring forward has been triggered, the two future years' entitlements are not indexed.

Provided the provisions remain unchanged, you trigger the bring forward provisions in the 2014-15 income year by making a contribution of X, an amount over the non-concessional contributions cap. This means you can only make further non-concessional contributions up to the unused bring forward amount over the 2015-16 and 2016-17 income years. As you would have reached the unused bring forward amount in the 2014-15 income year you will not be able to make contributions without exceeding the non-concessional contributions cap in the following two years.

As you plan to also contribute in the 2015-16 and 2016-17 income years you will have made excess non-concessional contributions.

The issue that now arises is whether your superannuation fund will be able to accept the additional non-concessional contributions after you turn 65 years of age.

Conditions of Accepting Contributions

Whether a regulated superannuation fund is able to accept contributions is determined under the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR).

Subregulation 7.04(1) of the SISR deals with the acceptance of contributions by regulated superannuation funds. This subregulation states:

A regulated superannuation fund may accept contributions only in accordance with the following table and subregulations (2), (3), (4) and (6).

Item 1 of the table under subregulation 7.04(1) of the SISR states that if the member is under 65, the fund may accept contributions made in respect of the member.

Item 2 of the table states that if the member is not under 65 but is under 70, the fund may accept member contributions in respect of the member if the member has been gainfully employed on at least a part time basis during the financial year in which the contributions are made. This is known as the work test.

Under subregulation 1.03(1) of the SISR 'gainfully employed' means:

employed or self employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.

The term part-time is defined under subregulation 7.01(3) of the SISR as follows:

In this Part, a person is gainfully employed on a part-time basis during a financial year if the person was gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in that financial year.

In this case, you will meet the work test in the 2015-16 and 2016-17 income years. This means your superannuation fund can accept contributions made by you after you reach age 65. However, as explained previously, these contributions will be in excess of the non-concessional contributions cap and attract tax at a rate of 46.5%.