Since 1 July 2017, your Total Superannuation Balance can affect how much you can contribute to a super fund. If your Total Superannuation Balance is $1.6 million or more (for the 2017/2018 year), then you cannot make any non-concessional (after-tax) contributions – your NCC cap is nil, and the bring-forward rule is not available.
Background: In layperson’s terms, your Total Superannuation Balance is your super savings held in accumulation phase, plus your super savings held in retirement phase. (For a more detailed explanation of your Total Superannuation Balance, including other ways it restricts super contributions, see SuperGuide article Total Superannuation Balance: 7 reasons why your TSB matters.)
The bring-forward rule allows an Australian under the age of 65 to make up to 3 years’ worth of non-concessional contributions (NCCs) in one financial year, representing his or her annual cap over a 3-year period. The bring-forward rule is triggered when an individual under the age of 65 exceeds his or her annual NCC cap in a financial year (for more information about the mechanics of the bring-forward rule, see SuperGuide article Bring-forward rule: A definitive super guide).
The bring-forward rule means that it is possible to make up to $300,000 (for the 2017/2018 year) in non-concessional (after-tax) super contributions in a single financial year without exceeding the non-concessional contributions cap.
What are the new bring-forward rules?
Since 1 July 2017, assuming you are under the age of 65, and your Total Superannuation Balance is less than $1.4 million, you can bring forward 3 years’ worth of the annual $100,000 non-concessional contributions cap.
The super rules get a bit more complicated however, if your Total Superannuation Balance is between $1.4 million and $1.5 million. While, if you have under $1.6 million in super, then you can only make up to $100,000 a year in non-concessional contributions.
In other words, since July 2017, it will be possible for an Australian under the age of 65 to make up to $300,000 in non-concessional contributions in one year (representing the cap for 3 years), subject to having less than $1.4 million in super.
Confused? What happened to the $1.6 million Total Superannuation Balance threshold restricting Australians from making non-concessional contributions? When did it drop to $1.4 million? Yes, the inexperienced government, and perhaps agenda-driven treasury advisers, have now made it a very complicated process to make non-concessional contributions. All Australians now have to regularly monitor their Total Superannuation Balance, even if they have nowhere near $1.6 million, or $1.4 million in super savings.
The government’s rationale for cutting the annual NCC cap and introducing an upper threshold is set out in the explanatory memorandum (Chapter 5) accompanying the legislation: “By reducing the annual non-concessional caps and restricting their use to those with balances less than the general transfer balance cap [$1.6 million], this measure will better target the tax concessions. This will encourage those with aspirations to build their superannuation balance up to an amount equal to the general transfer balance cap, while retaining the flexibility to accommodate lump sum contributions from one-off events such as receiving an inheritance or selling a large asset”.
How does your Total Superannuation Balance affect the bring-forward rule?
At the risk of repeating myself (but worth the risk due to the interplay of two fairly complex concepts), for individuals with large superannuation balances, the bring-forward rules work as follows:
- If you are under the age of 65, and you have a Total Superannuation Balance of less than $1.4 million (for the 2017/2018 year), you can make annual NCCs of up to $100,000 a year, AND you can use a maximum bring forward of $300,000 over a 3-year period.
- If your Total Superannuation Balance is equal to, or more than $1.4 million but less than $1.5 million (for the 2017/2018 year), then you can only bring forward up to 1 year of NCCs, over a 2-year period.
- If your Total Superannuation Balance is equal to, or more than $1.5 million but less than $1.6 million (for the 2017/2018 year_, then you cannot use the bring-forward rules, but you can still take advantage of the $100,000 annual NCC cap.
- If your Total Superannuation Balance is $1.6 million or more (for the 2017/2018 year), then you cannot make any non-concessional (after-tax) contributions, and obviously you then cannot take advantage of the bring-forward rule.
The table below provides a summary of how the $1.6 million Total Superannuation Balance (for the 2017/2018 year) affects non-concessional contributions.
When and how does the bring-forward rule apply (from 2017/2018 year)?
|Total superannuation balance on 30 June 2017||Non-concessional contributions cap for the first year||Bring-forward period|
|Less than $1.4 million||$300,000||3 years|
|$1.4 million to less than $1.5 million||$200,000||2 years|
|$1.5 million to less than $1.6 million||$100,000||No bring-forward period, general NCC cap applies|
|$1.6 million or more||Nil||n/a|
Source: Adapted from Explanatory Memorandum accompanying the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 .
For more information…
For more information about the non-concessional contributions rules, see the following SuperGuide articles:
- Your 2017/2018 guide to non-concessional (after-tax) contributions
- New $100,000 cap: Cut to non-concessional contributions cap
- Non-concessional contributions: 10 facts about new $100,000 cap
For more information about the bring-forward rule, see the following SuperGuide articles
- Bring-forward rule: A definitive super guide
- After-tax super contributions: Beef up using a bring forward
- Non-concessional contributions: Tread carefully when aged 63 or 64 or 65 (3 Q & As)
- Super contributions before and after age 65
- Super contributions: Turning 65 part-way through the year
- Understanding the transitional bring-forward rule (for 2017/2018 and 2018/2019 years)
For more information about the new threshold, Total Superannuation Balance, and what it means for your super benefits and retirement strategies, see the following SuperGuide article: