Non-concessional contribution strategies
The bring forward provisions for non-concessional contributions are a strategy that can be applied where a member is trying to get a significant amount of money into their SMSF in a fairly short space of time.
If the member is under age 65 on 1 July that financial year, they can bring forward an additional 2 years of their non-concessional contribution cap for 3 years in total. So instead of only being able to contribute $100,000 that year, they can contribute 3 times that amount being $300,000. They can do this in one go, or in separate amounts of any
amounts up to that limit over the 3 year time frame.
For example, say a member contributed $110,000 this financial year. The fact that this is over the $100,000 cap will trigger the bring forward provisions. They can then contribute another $190,000 either in one go, or in varying amounts, over the following two financial years.
This strategy is very useful for those people who have realised the sale of some larger assets, say the sale of a property, just prior to retirement and would like to get these amounts into the tax advantaged super environment. Don’t forget, the limits above are per person, so for a couple, this could be $600,000 combined that can go into the fund in one year.
Now the one caveat to the strategy we just went over is that the member’s non-concessional contributions cap amount and the amount they can bring forward is subject to their total superannuation balance or TSB.
The first limit is $1.4m. If their TSB is less than $1.4m, then everything we just went over applies to them, in that they can contribute their regular $100K this year plus bring forward 2 years so that they can do a full $300K now or over 3 years (and of course this assumes they haven’t triggered the bring forward provisions in the past 3 years).
However, if their balance is between $1.4m and $1.5m, they can do their full NCC $100K but only have access to one year of bring forward so that they can only do $200K either this year or over two years.
If their balance is between $1.5m and $1.6m, they can only access their regular NCC of $100K this year, and there is no bring forward.
And if their balance is $1.6m or more, they cannot do any NCCs.
One point to note is that if a member has triggered the bring forward and are eligible to make a bring forward contribution, but they don’t contribute the full amount that year – in the following two years if they wish to contribute the outstanding amount, their total super balance will need to be re-assessed at that point, and needs to be under the $1.6m threshold at 30 June of the prior financial year.