Edited version of administratively binding advice

Authorisation Number: 1012051124480

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Advice

Subject: Concessional and non-concessional superannuation contributions

Questions:

1. Can you make concessional contributions of up to $25,000 in the 2011-12 and 2012-13 income years?

2. Can you make non-concessional contributions of up to $150,000 in the 2011-12 and 2012-13 income years?

Advice

1. Yes, provided that you also satisfy all the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997).

2. Yes.

This advice applies for the following periods:

2011-12 income year

2012-13 income year

The arrangement commences on:

1 July 2011

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 have provided information in relation to the categories of income you anticipate to receive for the 2011-12 to the 2014-15 income years.

You are retired and receive a superannuation income stream and are not employed.

During the 2011-12 income year you withdrew some funds from your superannuation fund.

You wish to open a Superannuation Savings account by making contributions over the 2011-12 to 2014-15 income years, to increase your superannuation benefits.

You did not access the bring forward provision relating to non-concessional contributions in earlier income years.

You are over 60 years of age.

Relevant legislative provisions

Excess Concessional Contributions Tax) Act 2007 Section 4

Excess Concessional Contributions Tax) Act 2007 Section 5

Excess Non-Concessional Contributions Tax) Act 2007 Section 4

Excess Non-Concessional Contributions Tax) Act 2007 Section 5

Income Tax Assessment Act 1997 Subsection 290-150(2)

Income Tax Assessment Act 1997 Section 290-155

Income Tax Assessment Act 1997 Section 290-160

Income Tax Assessment Act 1997 Section 290-165

Income Tax Assessment Act 1997 Section 290-170

Income Tax Assessment Act 1997 Section 292-15

Income Tax Assessment Act 1997 Subsection 292-85(2)

Income Tax Assessment Act 1997 Subsections 292-85(3)

Income Tax Assessment Act 1997 Subsections 292-85(4)

Income Tax Assessment Act 1997 Section 292-410

Reasons for decision

Summary

You may make a concessional contribution for the 2011-12 and 2012-13 income years provided that you satisfy all the necessary legislative conditions.

The facts show that you will not exceed your concessional contributions cap for the 2011-12 and 2012-13 income years and accordingly not be subject to excess contributions tax.

You may make a non-concessional contribution of $150,000 for each of the 2011-12 and 2012-13 income years without being liable to excess contributions tax.

Detailed reasoning

Limits on concessional contributions

Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person.

Concessional contributions made to superannuation funds are subject to an annual cap. For the 2011-12 income year the annual cap is $25,000.

Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap applies for people aged 50 or over. For the 2011-12 income year this transitional cap is $50,000.

As you are over 50 years of age your concessional contributions cap is $50,000 for the 2011-12 income year.

For the 2012-13 income year and later, your concessional contributions cap will be $25,000, indexed to upward movements of AWOTE and rounded down to the nearest multiple of $5,000.

Concessional contributions made by both yourself and other persons to all of your superannuation funds are aggregated before being compared against your concessional contributions cap.

Personal deductible contributions of up to $50,000 in the 2011-12 income year, or up to $25,000 in the 2012-13 income year and later, will not result in excess contributions tax unless contributions by other persons result in you exceeding your concessional contributions cap.

Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.

Personal deductible contributions

Please note, that in order to make a personal deductible contribution you must satisfy all the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997).

These conditions include:

§ making the contribution to a complying superannuation fund

§ earning less than 10% of assessable income, reportable fringe benefits and reportable superannuation contributions from employment activities

§ making the contribution before 28 days after the end of the month in which you turn 75 years of age, and

§ providing the fund with a notice of your intent to claim a deduction for your contribution and receiving an acknowledgment of that notice.

Any deduction is further limited by section 26-55 of the ITAA 1997, which, in most cases, limits the deduction to your taxable income excluding the deduction for personal superannuation contributions.

Further, regulation 7.04 of the Superannuation Industry (Supervision) Regulations 1994 (ITAR) prevents a person making any personal contribution to a complying superannuation fund once they turn 65 years of age, unless they have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during the year of income.

Limits on non-concessional contributions

Non-concessional contributions include (among others):

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

§ contributions a person's spouse makes to the person's superannuation fund account (spouse contributions).

Non-concessional contributions made by a person to a complying superannuation fund are subject to an annual cap. For the 2011-12 income year onwards the annual non-concessional cap is six times the concessional cap. This means that, subject to the bring forward provisions, your non-concessional cap for the 2011-12 income year is $150,000.

The bring-forward provisions

As a concession, to accommodate larger contributions, persons under age 65 in a financial year are able to 'bring forward' future entitlements up 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.

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 a year where a bring forward has not already commenced.

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

In your case you may make up to $450,000 of non-concessional contributions (which is three times the annual cap amount of $150,000) during either the 2011-12, 2012-13 or 2013-14 income years.

Acceptance of contributions

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

The SIS Act and SISR are administered by the Commissioner only so far as they relate to self managed superannuation funds (SMSFs). Authority to make decisions under these legislative provisions, as they relate to non-SMSFs, rest with the Australian Prudential Regulation Authority (APRA).

Subregulation 7.04(1) of the SISR deals with the acceptance of contributions by regulated superannuation funds. For a fund to accept a contribution made in respect of a member who has reached the age of 65 but not age 70, the member must be 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.

Therefore, a person who is between age 65 and 70, and is engaged in paid employment, for at least 40 hours in a period of 30 consecutive days in that income year, will meet the work test. This means that their superannuation fund can accept the contributions made by them after reaching age 65.

Concessional and non-concessional contributions caps

For the 2013-14 and 2014-15 income years the concessional contributions cap of $25,000 will be indexed to upward movements of AWOTE and rounded down to the nearest multiple of $5,000 provided that you also satisfy sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997.

For the 2013-14 and 2014-15 income years the non-concessional contributions cap of $150,000 will increase as the concessional contributions cap changes with indexation (provided that you have not already triggered the bring forward provision in the previous two years).