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Subject: Non-concessional contributions cap - bring forward provisions
Question
Can the taxpayer contribute $450,000 in the 2011-12 income year without exceeding the non-concessional contributions cap?
Advice
Yes.
This ruling applies for the following periods:
2011-14 income years.
The scheme commences on:
1 July 2011.
Relevant facts and circumstances
This 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 Tax Office advice.
Your advice is based on the following facts.
You are retired and under 65 years of age.
You state that you would have contributed up to $150,000 of undeducted personal superannuation contributions to your superannuation fund by 30 June 2011.
You plan to contribute up to $450,000 to your superannuation fund during the 2011-12 income year.
Reasons for decision
Summary
As you are under 65 years of age at the start of the 2011-12 income year, you are able to bring forward the next two years worth of non-concessional contributions, which are not indexed. Therefore, you are able to contribute up to $450,000 over a three-year period, in this case over the 2011-12, 2012-13 and 2013-14 income years.
Contributions over the cap amount are subject to excess non-concessional contributions tax.
Detailed reasoning
From 1 July 2007, non-concessional contributions made to a complying superannuation fund will be subject to an annual (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For the 2009-10 income year onwards the annual cap is always six times the concessional contributions cap. Therefore, for the 2011-12 income year, as the concessional contributions cap is $25,000, 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 person's spouse makes to the person's superannuation fund (spouse contributions);
· transfers from foreign superannuation funds, excluding amounts included in the fund's assessable income; and
· contributions in excess of your concessional contributions cap - that is your excess concessional contributions
A person will be taxed on non-concessional contributions over the cap at the rate of 46.5% (section 292-80 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007). The 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).
As a concession, to accommodate larger contributions, persons under age 65 in a relevant income year are 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 income years without exceeding their non-concessional contributions cap (subsections 292-85(3) and (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 person who is under age 65 at any time in the year where a bring forward provision has not already commenced (section 292-85(3) of the ITAA 1997). Once this happens, the normal non-concessional contributions cap does not apply to the next two years. Instead, your total contributions over the next two years cannot exceed $450,000 minus the contributions you made in the year the bring-forward was triggered.
Where a bring forward has been triggered, the two future years' entitlements are not indexed.
Conclusion
As you are under 65 years of age at the start of the 2011-12 income year, you are able to bring forward the next two years worth of non-concessional contributions, which are not indexed. Therefore, you are able to contribute up to $450,000 over a three-year period, in this case over the 2011-12, 2012-13 and 2013-14 income years.