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Subject: Non-concessional contributions cap - bring forward limit
Questions
Can your client make a contribution up to the bring forward residual amount in the 2011-12 income year without exceeding the non-concessional contributions cap?
Advice/Answers
Yes.
This ruling applies for the following period
Year ending 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
Your client is a member of the Fund, a self managed superannuation fund.
In the 2010-11 income year, prior to turning age 65, your client made a contribution to the Fund invoking the $450,000 non-concessional bring forward contribution limit.
Your client is still in receipt of employment income and satisfies the work test.
Your client intends to make a further non-concessional contribution up to the bring forward residual amount to the Fund 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
Your client can make a contribution in the 2011-12 income year without exceeding the non-concessional contributions cap.
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:
· personal contributions for which an income tax deduction is not claimed;
· contributions a person's spouse makes to their superannuation fund account; and
· 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:
· a Government co-contribution;
· a contribution arising from a structured settlement or an order for personal injury;
· 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
· 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 at any time during the income year who makes non-concessional contributions 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) of the ITAA 1997.
In this case, in the 2010-11 (the first year) income year your client was eligible for and triggered the bring-forward provisions.
This means 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.
Therefore, your client can make a non-concessional contribution up to the bring forward residual amount to the Fund in the 2011-12 income year. Further, the Fund will be able to accept the contribution as your client meets the work test.