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Edited version of administratively binding advice
Authorisation Number: 1012495555656
Advice
Subject: Concessional and non-concessional contributions
Question 1
Does the concessional contributions cap of $50,000 apply to you for the 2011-12 income year?
Answer
Yes.
Question 2
Will the salary sacrifice contributions made in 2011-12 income year to your government superannuation scheme result in you exceeding your concessional contributions cap for that year?
Answer
No.
Question 3
Is the non-concessional contributions cap of $150,000 for the 2011-12 income year applied on a per person basis?
Answer
Yes.
This advice applies for the following periods
Year ending 30 June 2012
The scheme commences on
1 July 2011
Relevant facts and circumstances
You are a member of Fund 1 which is a self-managed superannuation fund (SMSF).
You are also a member of Fund 2 which is a government superannuation scheme.
The total amount of your reported employer contributions for Fund 2 for the 2011-12 income year including your salary sacrifice contribution does not exceed $30,000.
You stated that you made a non-concessional contribution into Fund 1 during the 2011-12 income year. This contribution comprised of a post tax contribution and interest which accrued in the SMSF.
You are under 65 years of age.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 290-150.
Income Tax Assessment Act 1997 Section 290-155.
Income Tax Assessment Act 1997 Section 292-15.
Income Tax Assessment Act 1997 Section 292-80.
Income Tax Assessment Act 1997 Section 292-85.
Income Tax Assessment Act 1997 Subsection 295-95(2)
Income Tax Assessment Act 1997 Subsection 995-1(1)
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 7.04(1).
Reasons for decision
Summary
Your concessional contributions cap for the 2011-12 income year is $50,000 which includes both employer and salary sacrifice contributions.
Your non-concessional contributions cap for the 2011-12 income year is $150,000.
As you were under 65 years of age during the 2011-12 income year, the 'bring forward' provisions may be triggered where a contribution in excess of the non-concessional cap is made in that income year.
Detailed reasoning
Concessional contributions cap
Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person.
Concessional contributions made to superannuation funds are subject to an annual cap. For the 2011-12 income year, all individuals have a concessional contributions cap of $25,000.
For individuals aged between 50 and 60 years of age, the annual cap for the 2011-12 income year is $50,000.
A person will be taxed on concessional contributions over the cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007).
If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the cap.
In this case, our records show that the total amount of reported employer contributions made into Fund 2 for the 2011-12 income year did not exceed $30,000.
The facts show you were over the age of 50 during the 2011-12 income year. Therefore, your concessional contributions cap for that income year will be $50,000.
As your total amount of concessional contributions including both employer contributions and salary sacrifice contributions is below your concessional contributions cap of $50,000, therefore, the salary sacrifice contributions made in 2011-12 income year to Fund 2 will not result in you exceeding your concessional contributions cap for that year.
Non-concessional contributions cap
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.
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.
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).
In this case, you stated that you made a non-concessional contribution of into Fund 1 during the 2011-12 income year which comprises of a post tax contribution and accrued interest.
Paragraph 133 of Taxation Ruling TR 2010/1 states:
"the Commissioner considers that an increase in the fund's capital due to income, profits and gains arising from the use of the fund's existing capital will not, generally, be derived from someone whose purpose is to benefit one or more particular members of the fund."
Therefore, any bank interest that has accrued in your SMSF will not count towards your non-concessional contributions cap. Accordingly, only the post tax contribution will count towards your non-concessional contributions cap for the 2011-12 income year.
Please note that you may trigger the bring forward provisions if you make a non-concessional contribution in excess of your non-concessional contributions cap of $150,000.
The Bring Forward Provisions
For a person who is 50 years of age or more their 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 age 65 at any time during an income year is able to 'bring forward' future entitlements equal to two years worth of non-concessional contributions. This means a person under age 65 in the 2010-11 and 2011-12 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.