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Edited version of administratively binding advice
Authorisation Number: 1012434943921
Subject: Non-concessional contributions- Bring forward provisions
Question
Can you make personal contributions of $300,000 in the 2013-14 income year without exceeding the non-concessional contributions cap?
Answer
No.
The scheme commences on:
Year ending 30 June 2014
Relevant facts and circumstances
You intend to make a non-concessional contribution of $300,000 to an Australian complying superannuation fund during July 2013. At the time of the contribution, you will be 65 years of age.
You are now fully retired and will not be engaging in any gainful employment during the 2013-14 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
Non-concessional contributions
According to section 292-90 of the Income Tax Assessment Act 1997 (ITAA 1997), non- concessional contributions include the following:
Ÿ personal contributions for which an income tax deduction is not claimed;
Ÿ contributions a person's spouse makes to their superannuation fund account; and
Ÿ 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:
Ÿ a Government co-contribution;
Ÿ a contribution arising from a structured settlement or an order for personal injury;
Ÿ 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
Ÿ a roll-over superannuation benefit.
Non-concessional contributions cap
Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap. The annual cap is specified under subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997).
For a person who is 50 years of age or more on 30 June 2014, their non-concessional contributions cap for the 2013-14 income year is $150,000.
The Bring Forward Provisions
Ordinarily, a taxpayer will have a non-concessional contributions cap that is three times the concessional contributions cap. Any contributions in excess of the non-concessional contributions cap will be taxed at the rate of 46.5% unless the bring-forward provisions apply.
Certain taxpayers can bring forward the contributions cap for two subsequent income years. This enables them to contribute amounts equal to those future caps in the current year without breaching the current year cap. When using these bring-forward rules, a taxpayer must not exceed the total of three times the current year cap over the course of three years. When a taxpayer initially breaches the non-concessional contributions cap by making excess non-concessional contributions, their future cap entitlement is automatically brought forward. This ensures that the taxpayer will not breach the cap in that initial year.
It must be noted that taxpayers who are aged 65 years or older are not able to access these rules. In particular, taxpayers aged between 65 and 75 years of age can only make non-concessional contributions where they have satisfied the 'work test' as specified in regulation 7.01(3) of Superannuation Industry (Supervision) Regulations 1994 (SISR 1994).
The Work Test
Broadly, the 'work test' requires a taxpayer aged between 65 to 74 years of age to have been 'gainfully employed' on at least a part-time basis during the financial year in which the contribution was made.
Regulation 1.03 of the SISR 1994 defines being 'gainfully employed' as follows:
gainfully employed means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
You stated in the facts that you are now fully retired and have no intention to return to employment. As such, you will not be engaging in any gainful employment in the 2013-14 income year. Consequently, you will not meet the requirements of the 'work test' under section regulation 7.01(3) of SISR 1994.
Conclusion
In the 2013-14 income year you will be 65 years of age. As you will not be engaging in gainful employment during the income year, you will not satisfy the requirements of the 'work test'. Therefore, you will not be able to make a contribution of $300,000 without exceeding the non-concessional contributions cap.