Edited version of administratively binding advice

Authorisation Number: 1012617447379

Advice

Subject: Non-concessional contributions cap - bring forward provision

Issue

Non-Concessional contributions cap

Question

Can the Taxpayer make non-concessional contributions of $X in the 2014-15 financial year without exceeding the Taxpayer's non-concessional contributions cap amount for the year?

Answer

Yes

This advice applies for the following periods

Financial year ending 30 June 2015

The scheme commences on

During the financial year ending 30 June 2015

Relevant facts and circumstance

The Taxpayer is a member of a complying superannuation fund (the Fund).

The Taxpayer proposes to make non-concessional contributions of $X to the Fund during the 2014-15 financial year, prior to the Taxpayer turning 65 years of age.

On the 1 July 2014, the Taxpayer will be less than 65 years.

In the 2013-14 financial year, the Taxpayer made a non-concessional contribution of $Y.

The Taxpayer did not make any concessional or non-concessional contributions to the Fund in the 2011-12 and 2012-13 financial years.

The Taxpayer is not employed and they have no intention of re-entering the workforce.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 291-20(2)

Income Tax Assessment Act 1997 Section 292-85

Income Tax Assessment Act 1997 Subsection 292-85(2)

Income Tax Assessment Act 1997 Paragraph 292-85(3)

Income Tax Assessment Act 1997 Subsection 292-85(4)

Income Tax Assessment Act 1997 Subsection 292-90(1)

Income Tax Assessment Act 1997 Section 960-285

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Summary of decision

The non-concessional contributions cap amount for the 2014-15 financial year is $180,000.

However, as the Taxpayer will be under 65 years on 1 July 2014 (the beginning of the 2014-15 financial year) if, at any time in that year, the Taxpayer makes non-concessional contributions in excess of $180,000, bring- forward provisions will be trigged and the Taxpayer's non-concessional contributions cap amount for that year will be $X.

Therefore, the Taxpayer can make non-concessional contributions of up to $540,000 in the 2014-15 financial year without exceeding their non-concessional contributions cap amount for the year.

Detailed reasoning

Excess non-concessional contributions

In accordance with section 292-85 of the Income Tax Assessment Act 1997 (ITAA 1997), a person has excess non-concessional contributions for a financial year if the amount of the person's non-concessional contributions for the year exceeds the person's non-concessional contributions cap for the year.

Relevantly, subsection 292-85(2) of the ITAA 1997 states that for the 2009-10 or a later financial year, a person's non-concessional contributions cap for the year is an amount equal to six times the person's concessional contributions cap for the year.

Concessional contributions cap is defined in subsection 291-20(2) of the ITAA 1997. For the 2013-14 financial year, the cap is set at $25,000. In accordance with section 960-285 of the ITAA 1997, for 2014-15 or a later financial year, the cap amount is indexed annually in line with average weekly ordinary time earnings, in increments of $5,000 (rounded down).

Financial year is defined in subsection 995-1(1) of the ITAA 1997 as a period of 12 months beginning on 1 July.

Based on the above, the concessional contributions cap for the financial year beginning 1 July 2014 is $30,000 (indexed). Consequently, the non-concessional contributions cap for the year is $180,000.

However, in accordance with subsections 292-85(3) and (4) of the ITAA 1997, if a person's non-concessional contributions for the first year exceed the annual non-concessional contributions cap amount for the year; and the person is under 65 years at any time in the first year, the non-concessional contributions cap for the first year is increased to three times the annual non-concessional contributions cap amount. That is, the person can 'bring forward' two years' worth of non-concessional contributions.

The bring-forward is triggered automatically when contributions in excess of the annual non-concessional contributions cap amount are made in a financial year. However, according to subsection 292-85(3) of the ITAA 1997, this is on the condition that a bring-forward has not been trigged in the preceding two financial years.

The 'bring forward' provisions can be activated every three years. However, where a bring forward has been triggered, the two future years' entitlements are not indexed.

Application of section 292-85 to this case

If the Taxpayer does not exceed their non-concessional contributions cap for the 2012-13 financial year, the Taxpayer will not trigger bring- forward provisions. Consequently, the Taxpayer's non-concessional contributions cap for the 2014-15 financial year would be $180,000.

However, on 1 July 2014 (the beginning of the 2014-15 financial year) the Taxpayer will be less than 65 years of age. Therefore, if at any time during the 2014-15 financial year the Taxpayer makes non-concessional contributions in excess of the non-concessional cap amount for the year, the Taxpayer will trigger the bring-forward provisions and the Taxpayer's non-concessional contributions cap amount in that (first) year will be $540,000.

It follows that the Taxpayer can make non-concessional contributions of up to $540,000 in the 2014-15 financial year without exceeding their non-concessional contributions cap amount for the year

Other relevant comments

Please note that in accordance with subsection 292-90(1) of the ITAA 1997, the amount of your non-concessional contributions for a financial year includes an amount of your excess concessional contributions (if any) for the year.