Superannuation "Bring Forward" Rule

Understanding the Superannuation Bring Forward Rule
Written and accurate as at: Sep 09, 2014

The maximum after tax personal contribution amount that you can make to your superannuation fund increased on 1 July 2014 to $180,000 per year (non-concessional contributions). If you are 65 or under, you may also have the option to use the bring forward rule, which provides you with a limit of $540,000 within a 3-year period.

What are non-concessional contributions?

Non-concessional contributions are  personal contributions  you make to your superannuation fund using your after-tax salary or a lump sum of cash where you don’t claim a tax deduction. These contributions differ from concessional contributions, which are amounts that your employer may put into superannuation on your behalf (including superannuation guarantee (SG) contributions and salary sacrifice contributions) or personal deductible contributions if you’re self-employed.

What are the non-concessional contribution limits?

The amount that you can contribute to superannuation as a non-concessional contribution will depend on your age, as at 1 July of the financial year that you wish to make a contribution.

  • If you are under age 64 on 1 July then:

Your non-concessional annual limit will be $180,000 for the period 1 July to 30 June in that financial year. You can make a single contribution or multiple contributions throughout the financial year as long as they are below this $180,000 limit.

If you make contributions to super above this limit, even if it’s just by one dollar, then the two year bring forward rule will be automatically triggered. Once you’ve triggered the bring forward rule, a limit of $540,000 will apply for the current financial year and the following two financial years.

For example:

Richard is 55. He decides to make a non-concessional contribution to his superannuation in the 2014/15 financial year of $250,000. Because the contribution exceeds the annual limit, the bring forward provisions automatically trigger allowing Richard to use the limits for the 2015/16 and 2016/17 years. Richard will have a new limit of $540,000 which will apply for three years.

If Richard decides to make a future contribution next year or the year after, he will have $290,000 remaining of his limit. In 2017/18 Richard’s non-concessional limit will reset to the annual amount (i.e. $180,000, or the indexed equivalent amount).

  • If you are 64 on 1 July then:

Your non-concessional annual limit will be $180,000 for the period 1 July to 30 June in that financial year. You can make a single contribution or multiple contributions throughout the financial year as long as they are below this $180,000 limit.

If you make contributions to super above this limit in 2014/15, even if it’s just by one dollar, then the two year bring forward rule may be triggered to access the larger limit of $540,000.

For example:
Joan turns 65 on 1 December 2014. She will be retiring in 2015/16. Joan decides to make a $340,000 non-concessional contribution to boost her super. Because she was aged 64 on 1 July 2014, Joan is able to use the bring forward provisions to make this contribution which gives her a new limit of $540,000.

As Joan’s contribution is less than the $540,000 limit, she will have $200,000 remaining for 2015/16 and 2016, however because she will be age 65  she will only be able to make further contributions in those years if she can satisfy a “work-test” (discussed below).  
If Joan was working in 2015/16 and 2016/17 and could satisfy the work test, then she could access this remaining limit.

In 2017/18 Joan’s non-concessional limit would reset to the annual amount and if working, she could still contribute to super.

  • If you are 65 or older on 1 July then:

To be able to make a non-concessional contribution to superannuation, you will first need to satisfy a ‘work test’ which means that you will need to work at least 40 hours within a 30 consecutive day period, in the financial year that you wish to make a contribution to your super fund. The maximum non-concessional contribution will be $180,000 pa. You will need to satisfy the work test for each year you intend to make a contribution to super between the ages of 65 and 74 years old. It is not possible to use the bring forward rule if you are 65 or older.

As you can see, there are a few different rules and limits at play here, so it pays to get a good understanding of how the limits work and how they apply to your situation.
If you’re not sure how the limits apply to you, or how best to maximise contributions to super within your limits, speak to you adviser who can clarify for you.

 

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