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Authorisation Number: 1012399604147

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Advice

Subject: Non-concessional contributions - Bring forward provisions

Questions

Will the bring forward provisions be triggered if you make a non-concessional contribution of $450,000 to your self managed superannuation fund (the Fund) during the 2012-13 income year after turning 65 years of age?

Can the Fund accept any contribution from you after you turn 65 years of age?

Advice/Answers

Yes.

We cannot rule on this issue. Please refer to the general advice included in our response.

This ruling applies for the following periods

2012-13 income year

The scheme commenced on

1 July 2012

Relevant facts

You are currently 65 years of age.
You are the sole trustee and member of the Fund.

You sold a property for more than $450,000 during the 2012-13 income year.

You intend to make a cash contribution of $450,000 into the Fund during the income year ending 30 June 2013.

You are currently deriving rental income from two other investment properties that you own and you carry out all the repairs and maintenance of these properties.

Assumptions

None.

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 bring forward provisions would be triggered if you made a non concessional contribution of $450,000 however as you have turned 65 years of age and are not gainfully employed, the fund cannot accept contributions from you.

Detailed reasoning

Question 1 - Will the bring forward provisions be triggered if you make a non-concessional contribution of $450,000 to the Fund during the 2012-13 income year after turning 65 years of age?

Non-concessional contributions cap

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.

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 2012-13 income year, the non-concessional contributions cap is $150,000.

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).

Therefore, any personal contributions that you make during the 2012-13 income year for which you do not claim an income tax deduction will count towards your non-concessional contributions cap for that year.

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 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.

In this case, as you turned 65 during the 2012-13 income year, you are eligible for the bring-forward provision up until the 30 June 2013.

Proposed non-concessional contributions to be made in the 2012-13 income year

Under subsection 292-85(3), a person can contribute up to $450,000 (subject to any indexation increase) utilising the bring forward provision at any time during the income year in which you turn 65 years of age.

However, there are restrictions that apply to persons 65 years of age or over making personal superannuation contributions. For the fund to accept any contributions you make after you turn 65 years of age you will need to satisfy the work test.

Questions 2 - Can the fund accept any contribution from you after you turn 65 years of age?

Your application asks for a ruling on whether you can contribute to the Fund which is your self managed super fund after you turn 65 years of age.

This question is related to issues covered by the Superannuation Industry (Supervision) Act 1993. Accordingly, the application for a private ruling for the purpose of Division 359 of schedule 1 to the Taxation Administration Act 1953 (TAA) has been declined in respect of this question.

However, the Commissioner provides the following general advice on the above matter.

'Work test'

Under subregulation 7.01(3) of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) there are no conditions required to be met in order for a superannuation fund to accept contributions from a member who is under age 65.

However, where the member is between age 65 and age 70, they must be gainfully employed on at least a part-time basis during the income year in order for a superannuation fund to be able to accept contributions from that member. To meet this requirement, the member must be gainfully employed for a least 40 hours in a period of not more than 30 consecutive days in that income year. This is generally referred to as the 'work test'.

'Gainfully employed' means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment (subregulation 1.03(1) of the SIS Regulations). The concept of 'gain or reward' envisages receipt of remuneration such as salary or wages, business income, bonuses, commissions, fees or gratuities, in return for personal exertion. It does not encompass a person who is only receiving passive income (e.g. trust distributions, dividends) or a person who does 'volunteer' work.

Please note that whilst you are currently receiving rental income from your two investment properties, this is considered passive income. Furthermore, although you conduct the repairs and maintenance for these two rental properties, this does not constitute gainful employment as you are not considered to be employed or 'self employed'. Therefore, you will not satisfy the work test for the purposes of subregulation 7.01(3) of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) on this basis.

Conclusion:

The bring forward provisions would be triggered if you made a non concessional contribution of $450,000 however as you have turned 65 years of age and are not gainfully employed, the fund cannot accept contributions from you.