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Subject: Non-concessional contributions - bring forward provisions
Questions
Will the 'bring forward' provision under subsection 295-85(4) of the Income Tax Assessment Act 1997 be triggered where a contribution in excess of the non-concessional cap is made in the 2011-12 income year?
Advice/Answers
Answer: Yes
This ruling applies for the following period
Year ending 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
In the 2011-12 income year you are under 65 years of age.
You have not already triggered the bring forward provision.
You intend to make non-concessional contributions in excess of $150,000 and up to $450,000 in the 2011-12 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-80.
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).
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Regulations 1994
Reasons for decision
Summary of decision
In the 2011-12 income year you are under 65 years of age, have not already triggered the bring forward provision and intend to make non-concessional contributions in excess of $150,000 and up to $450,000. Therefore, you are able to trigger the bring-forward provisions by contributing an amount in excess of $150,000 and up to $450,000 in the 2011-12 income year.
Detailed reasoning
Non-concessional contributions cap
Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For a person who is 50 years of age or more their non-concessional contributions cap for the 2011-12 income year is $150,000.
Non-concessional contributions include:
o personal contributions for which an income tax deduction is not claimed;
o contributions a person's spouse makes to their superannuation fund account; and
o transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income).
Some contributions are specifically excluded from being non-concessional contributions. These include:
o a Government co-contribution;
o a contribution arising from a structured settlement or an order for personal injury;
o 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
o a roll-over superannuation benefit.
A taxpayer will be taxed on non-concessional contributions over the cap at the rate of 46.5% (section 292-80 of the ITAA 1997).
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.
The Bring Forward Provisions
For a person who is 50 years of age or more their transitional concessional contribution cap for the 2011-12 income year is $50,000, and their non-concessional contributions cap is $150,000.
However, subsections 292-85(3) and (4) of the ITAA 1997 ('the bring-forward provisions') provide that the non-concessional contributions cap is calculated differently if certain conditions are satisfied.
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:
· your non-concessional contributions for the first year exceed the amount mentioned in subsection (2) for that year; and
· you are under 65 years at any time in the first year; and
· a previous operation of subsection (4) does not determine your non-concessional contributions cap for the first year.
Therefore, a person who is under 65 years of age who makes non-concessional contributions during the income year that exceed the non-concessional contributions cap specified under subsection 292-85(2) of the ITAA 1997, would trigger the bring-forward provisions and their non-concessional cap would be calculated in accordance with subsection 292-85(4).
In this case, in the 2011-12 (the first year) income year you are under 65 years of age, have not already triggered the bring forward provision and intend to make non-concessional contributions in excess of $150,000 and up to $450,000. Therefore, you will be eligible for and trigger the bring-forward provisions in the 2011-12 income year.
This means your two future years' entitlements up to the bring forward residual amount can be made in the 2012-13 and 2013-14 income years without breaching the non-concessional contributions caps for those income years.
Please note, rules on wether 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).