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Subject: Non-concessional contributions - bring forward provision
Question 1
Will the proposed contributions be made in the relevant income year be non-concessional contributions if you do not claim a tax deduction for those contributions?
Advice
Yes.
Question 2
Will you trigger the 'bring forward' provisions under subsection 292-85(4) of the ITAA 1997 in the relevant income year on the facts provided?
Advice
Yes.
Question 3
Can you make personal contributions up to $450,000 between 1 July 20XX and 30 June 20YY without exceeding the non-concessional contributions cap?
Advice
Yes.
This ruling applies for the following period
Year ending 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
You are currently under 65 years of age.
You are permanently retired.
During the relevant income year, you withdrew all of your superannuation as a tax free lump sum.
You intend to make a personal contribution of up to $450,000 into a public offer fund during the relevant income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-80.
Income Tax Assessment Act 1997 Section 292-85.
Income Tax Assessment Act 1997 Subsection 292-85(2).
Income Tax Assessment Act 1997 Subsection 292-85(3).
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.
Superannuation Industry (Supervision) Regulations 1994 Subregulation 1.03(1).
Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.01(3).
Reasons for decision
Summary of decision
The ATO does not have any records of after-tax contributions made by you during the 200XX -20YYincome years. Therefore, if you make non-concessional contributions of up to $X to a superannuation fund in the relevant income year, you will trigger the bring-forward provisions.
You will be able to contribute a further $Z utilising the bring-forward provision in the relevant year and, subsequent 2 years, without breaching the non-concessional contributions cap.
Detailed reasoning
Question 1
Will the proposed contributions be made in the relevant income year be non-concessional contributions if you do not claim a tax deduction for those contributions?
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 indexed annual cap. For the 2011-12 and 2012-13 income years, the non-concessional contributions cap is $150,000.
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 their superannuation fund account.
A taxpayer will have a liability to pay excess non-concessional contributions tax at the rate of 46.5% if they have excess non-concessional contributions for an income year (subsection 292-80 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007).
Under section 292-410 of the ITAA 1997, the taxpayer will be required to ask their superannuation fund to release an amount that is equal to the tax liability.
Therefore, any personal contributions that you make during the relevant income year for which you do not claim an income tax deduction for will count towards your non-concessional contributions cap for that year.
Question 2
Will you trigger the 'bring forward' provisions under subsection 292-85(4) of the ITAA 1997 in the relevant income year on the facts provided?
The bring-forward provisions
As a concession, to accommodate larger contributions, persons who are under age 65 at any time during an income year are able to 'bring forward' future entitlements equal to two years worth of non-concessional contributions. This means a person under age 65 in the 2011-12 and 2012-13 income years is able to contribute non-concessional contributions totalling $450,000 over three income years without exceeding their non-concessional contributions cap as per 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).
Once a bring-forward has been triggered, the two future years' entitlements are not indexed.
Non-concessional contributions made in the 2012-13 income year
During the relevant income year, you intend to make non-concessional contributions of up to $450,000 into a public offer fund. This will result in you exceeding the non-concessional contributions cap of $150,000 for that income year.
As you will be under age 65 for the entire income year and the bring-forward under subsection 292-85(3) of the ITAA 1997 had not already commenced, this contribution will automatically trigger the bring-forward provisions.
Question 3 -
Can you make personal contributions up to $450,000 between 1 July 20XX and 30 June 20YY without exceeding the non-concessional contributions cap?
You propose to make a personal contribution totalling up to $450,000 (utilising the bring forward provisions) during the relevant income year.
As noted earlier, your non-concessional contributions cap is $Z for the relevant income year.
As you are currently under 65 years of age and have triggered the bring-forward provisions during the relevant income year, you will be able to make non-concessional contributions of up to three times your non-concessional contributions cap over a three-year period. This means you can make personal contributions (for which you do not claim tax deduction for) of up to $450,000 between 1 July 20XX and 30 June 20YY without exceeding the non-concessional contributions cap.