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Subject: non-concessional contributions cap - bring forward provision
Relevant facts
In May 2008, you were under age 62 and had to finish work due to health issues.
You contributed $XX0,000 to your superannuation fund during the 2007-08 income year and triggered the 'bring forward' provision of the non-concessional contributions cap for the three year period up to the 2009-10 income year.
Currently, you are under age 65 and not working at all.
You are a self-funded retiree.
You wish to contribute another $XX0,000 into your superannuation fund during the 2011-12 income year.
You will be turning age 65 in November 2012 (the 2012-13 income year).
You are aware of the requirement to satisfy the work test set out in the superannuation legislation if you want to make the contribution to your superannuation fund when you are age 65 .
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 Paragraph 292-85(3)(a).
Income Tax Assessment Act 1997 Paragraph 292-85(3)(b).
Income Tax Assessment Act 1997 Paragraph 292-85(3)(c).
Income Tax Assessment Act 1997 Subsection 292-85(4).
Income Tax Assessment Act 1997 Section 292-410.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 4.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 5.
Reasons for decision
Summary
As you are under age 65 during the 2011-12 income year, you are able to make a contribution of $XX0,000 during the 2011-12 income year which will automatically trigger the 'bring forward' future entitlements of two years worth of non-concessional contributions ($XX0,000 x X = a total of $XX0,000).
If you make the contribution of $XX0,000 during the 2012-13 income year and while you are under age 65 (that is, prior to turning age 65 in November 2012), the 'bring forward' will be triggered automatically.
If you make the contribution of $XX0,000 prior to turning age 65 you will not be required to meet the work test in order to make the contribution.
Detailed reasoning
Non-concessional contributions cap
Under subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997) non-concessional contributions made to a complying superannuation fund are subject to an annual cap of $150,000.
'Bring forward' provisions
As a concession, to accommodate larger contributions, persons under age 65 in an income year are able to 'bring forward' future entitlements of two years worth of non-concessional contributions. This means a person under age 65 will be able to contribute non-concessional contributions totalling $XX0,000 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 has not already commenced (subsection 292-85(3) of the ITAA 1997).
As you intend to make a contribution of $XX0,000 during the 2011-12 income year and you are under age 65 in that year, the bring forward will be automatically triggered as the contribution is in excess of the annual non-concessional contributions cap ($150,000) for that income year. This will mean you cannot make another non-concessional contribution to your superannuation fund over the following two income years (20012-13 and 2013-14) without the contributions being treated as excess non-concessional contributions which may be subject to excess non-concessional contributions tax being payable under the Superannuation (Excess Non-concessional Contributions Tax) Act 2007.
If you make non-concessional contributions to your superannuation fund after you turn age 65, you can only do so provided you satisfy the work test set out in the Superannuation Industry (Supervision) Regulations 1994.