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Edited version of private ruling
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Ruling
Subject: Non-concessional contributions cap - bring forward provisions
Question
Will the 'bring forward' provision under subsection 292-85(4) of the Income Tax Assessment Act 1997 (ITAA 1997) be triggered where a contribution in excess of the non-concessional cap is made on the day the taxpayer reaches age 65?
Advice/Answer
No.
This ruling applies for the following period
For the year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
Your client will reach age 65 at the beginning of the 2011-12 income year.
Your client will be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during the 2011-12 income year.
Your client would like to maximise the amount of non-concessional contributions of $150,000 to be made in the 2010-11 income year and utilise the bring forward provisions of $450,000 for the 2011-12 income year.
Relevant legislative provisions
Acts Interpretation Act 1901 Section 25E.
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).
Summary
As your client will have reached age 65 at the beginning of the 2011-12 income year your client will be unable to take advantage of the $450,000 'bring forward' provisions in the 2011-12 income year.
Detailed reasoning
Non-concessional contributions cap
Subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a taxpayer's non-concessional cap for the year is the amount that is three times their concessional contribution cap for the year.
For a person who is 50 years of age or more their concessional contribution cap for the 2010-11 income year is $50,000, therefore their non-concessional contributions cap for the 2010-11 income year is $150,000.
The Bring Forward Provisions
Under subsection 292-85(4) of the ITAA 1997 a person can bring forward future entitlements to two years worth of non-concessional contributions if they meet the requirements of subsection 292-85(3) of the ITAA 1997. That is, a person will be able to contribute non-concessional contributions totalling $450,000 over three financial years without exceeding their non-concessional contributions cap.
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 must be under 65 years of age for at least one day of a financial year in order to be able to bring forward their future entitlements to two years worth of non-concessional contributions.
The explanatory memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006 (the EM) states the following in relation to the 'bring forward' provisions:
1.85 As a concession, to accommodate larger contributions, people under age 65 in a financial year will be able to bring forward future entitlements to two years worth of non-concessional contributions. This means a person under age 65 will be able to contribute non-concessional contributions totalling $450,000 over three financial years without exceeding their non-concessional contributions cap. [Schedule 1, item 1, subsections 292-85(3) and (4)]
1.86 The bring forward will be triggered automatically when contributions in excess of the annual non-concessional contributions cap are made in a financial year by a person who is under age 65 at any time in the year where a bring forward has not already commenced. [Schedule 1, item 1, subsection 292-85(3)]
1.87 Where a bring forward has been triggered, the two future years' entitlements are not indexed. [Schedule 1, item 1, subsection 292-85(4)]
The Acts Interpretation Act 1901 (AIA) contains provisions which apply to the interpretation of Commonwealth statutes. In particular, section 25E deals with the attainment of a particular age and states:
For the purposes of any Act, unless the contrary intention appears, the time at which a person attains a particular age expressed in years is the commencement of the relevant anniversary of the date of the birth of that person. (emphasis added)
In other words, by virtue of section 25E of the AIA, there will be no time at which your client would be considered to be under age 65 during the 2011-12 income year.
As your client, by virtue of section 25E of the AIA, is not under the age of 65 in the 2011-12 income year, the requirements under subsection 292-85(3) of the ITAA 1997 will not be satisfied and the $450,000 'bring forward' provision under subsection 292-85(4) will not be available to your client.
However, as your client will be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during the 2011-12 income year, your client will be able to make non-concessional contributions of up to $150,000 (subject to any increases by indexation) during the 2011-12 income year.