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Edited version of administratively binding advice
Authorisation Number: 1012503187744
Advice
Subject: Non-concessional contributions
Questions
Can your client trigger the bring forward provisions in the relevant income year?
Advice/Answers
Yes.
This ruling applies for the following periods
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
Your client intends to make a non-concessional contribution into their complying superannuation fund during the 2013-14 income year.
Your client triggered the bring forward provisions prior to the 2010-11 income year.
Your client paid excess non-concessional contributions tax during the 2010-11 income year.
You stated that your client did not make any non-concessional contributions during the 2011-12 and 2012-13 income years.
Your client turns 65 years of age during the relevant income year.
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 of decision
The 'bring forward' provisions may be triggered by your client during the relevant income year where a contribution in excess of the non-concessional cap is made in that income year.
Your client will need to satisfy the work test in order to make any superannuation contributions after turning 65 years of age.
Detailed reasoning
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 2012-13 and 2013-14 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.
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 and 2013-14 income years is able to contribute non-concessional contributions totalling $450,000 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, your client exceeded their non-concessional contributions cap and bring forward cap and was consequently issued with a Notice of Assessment for the excess non-concessional contributions for the 20XX income year.
You also stated that your client did not make any non-concessional contributions during the 2011-12 and 2012-13 income years.
As your client will be under age 65 during the relevant income year and the bring-forward under subsection 292-85(3) of the ITAA 1997 has not already commenced, your client will automatically trigger the bring-forward provisions if they make a non-concessional contribution during the relevant income year that is in excess of their non-concessional contributions cap for that year.
Please note that if your client attempts to make a contribution once they have reached the age of 65, their superannuation fund may not be able to accept the additional non-concessional contributions unless they satisfy the work test.
Conditions of Accepting Contributions
Whether a regulated superannuation fund is able to accept contributions is determined under the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR).
Subregulation 7.04(1) of the SISR deals with the acceptance of contributions by regulated superannuation funds. This subregulation states:
A regulated superannuation fund may accept contributions only in accordance with the following table and subregulations 7.04(2), (3), (4) and (6) of the SISR:
Item |
If the member |
The fund may accept |
1 |
is under 65 |
contributions that are made in respect of the member |
2 |
is not under 65, but is under 70 |
contributions that are made in respect of the member that are: (a) mandated employer contributions; or (b) if the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made: (i) employer contributions (except mandated employer contributions); or (ii) member contributions |
3 |
is not under 70, but is under 75 |
contributions that are made in respect of the member that are: (a) mandated employer contributions; or (b) if the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made - contributions received on or before the day that is 28 days after the end of the month in which the member turns 75 that are: (i) employer contributions (except mandated employer contributions); or (ii) member contributions made by the member |
4 |
is not under 75 |
mandated employer contributions |
Therefore, a complying superannuation fund can only accept a member contribution from a member who has reached 65 years of age, and is below the age of 75, if they have been gainfully employed on at least a part-time basis. This is known as the 'work test'.
Under subregulation 1.03(1) of the SISR 'gainfully employed' means:
employed or self employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
The term 'gainfully employed on a part-time basis' is defined under subregulation 7.01(3) of the SISR as follows:
In this Part, a person is gainfully employed on a part-time basis during a financial year if the person was gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in that financial year.