Understanding the transitional bring-forward rule (for 2018/2019 and 2017/2018 years)

Transitional bring-forward rule for 2017/2018 year

Q1: What cap applies for the 2017/2018 year, if I triggered the bring-forward rules during the 2016/2017 or 2015/2016 years?

If you triggered a bring forward during the 2015/2016 year, or the 2016/2017 year, and you didn’t fully utilise the bring forward by 30 June 2017, then you need to be aware of the transitional rules applicable from July 2017.

Transitional arrangements apply for Australians who are in the middle of a bring-forward arrangement, that is, the bring-forward rule was activated in the 2015/2016 or 2016/2017 years.

If an individual triggered a bring forward during the 2015/2016 year (and it was not fully utilised by 30 June 2017), then the bring-forward cap for the 3-year period from 1 July 2015 through to 30 June 2018, is $460,000 ($180,000 + $180,000 + $100,000).

If an individual triggered a bring forward during the 2016/2017 year (and it was not fully utilised by 30 June 2017), the bring-forward cap for the 3-year period from 1 July 2016 through to 30 June 2019 is $380,000 ($180,000 + $100,000 + $100,000). See example later in the article.

Transitional bring-forward rule for 2018/2019 year

Q2: What cap applies for the 2018/2019 year, if I triggered the bring-forward rules during the 2016/2017 year?

If you triggered a bring forward during the 2016/2017 year, and you didn’t fully utilise the bring forward by 30 June 2017, then the bring-forward cap for the 3-year period from 1 July 2016 through to 30 June 2019 is $380,000 ($180,000 + $100,000 + $100,000). See example later in the article.

How does the transitional bring-forward rule work?

Quoting from the explanatory memorandum (Chapter 5) that enacted this rule, “Where an individual triggered their bring forward period in the 2015-16 financial year, their non-concessional contributions caps for the first (2015-16) and second (2016-17) years are set by the rules that applied to those financial years. However, the cap for the third year (2017-18) will be set by transitional rules put in place by [Schedule 3 of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016]”.

On 1 July 2017, the remaining bring-forward amount was reassessed to reflect the new annual non-concessional contributions (NCC) cap of $100,000.

What this means is that an individual who triggered the bring-forward rule during the 2016/2017 year (assuming under the age of 65), could have made up to $540,000 in NCC for the 2016/2017 year, and complied with the NCC rules. If the individual did not fully utilise the $540,000 cap during the 2016/2017 year, then the maximum bring-forward cap is no longer $540,000, but drops to reflect the cut in the annual NCC cap since July 2017.

Note: You must be under the age of 65 to take advantage of the bring-forward rule (see SuperGuide articles Super contributions: Turning 65 part-way through the year and Non-concessional contributions: Tread carefully when aged 63 or 64 or 65 (3 Q & As)).

Transitional bring-forward rule: 2 examples

Example 1: Margaret makes a $200,000 NCC during 2016/2017 year

If Margaret made a NCC of $200,000 during the 2016/2017 year, she triggers the bring-forward rule. Due to the drop in the annual NCC cap from July 2017, her maximum bring-forward capacity for the remaining 2 years of the bring-forward period is $180,000 (that is $180,000 + $100,000 + $100,000 less $200,000). If Margaret had triggered the bring-forward rule during the 2015/2016 financial year with a $200,000 NCC, and then made a $120,000 NCC during the 2016/2017 year, her maximum bring-forward cap for the 2017/2018 year would be $140,000 ($180,000 + $180,000 + $100,000 less $200,000 less $120,000), assuming her Total Superannuation Balance is less than $1.6 million. See later in the article for restrictions on the bring-forward rule if you have more than $1.6 million in super.

The explanatory memorandum accompanying the legislation provides the following example (Molly) of the transitional provisions, set out below. We have reworded the original example.

Example 2: Molly contributes $250,000 in September 2016

Molly is 40 and had a total superannuation balance of $200,000 as at 30 June 2016. In September 2016, she received an inheritance of $250,000, and made a $250,000 non-concessional contribution into her super fund account. This super contribution triggered her three-year bring forward, which was $540,000 (until 30 June 2017). Since 1 July 2017, Molly’s bring-forward cap has now been lowered, due to the lowering of the annual NCC cap. Rather than a remaining bring-forward cap of $290,000 ($540,000 less $250,000), Molly can now only make further non-concessional contributions of $130,000 ($180,000 + $100,000 + $100,000 less $250,000). She chooses to make a NCC of $110,000 during the 2017/2018 financial year, and $20,000 during the 2018/2019 financial year. From the 2019/2020 financial year, Molly can then access the new bring forward, and contribute up to $300,000 in non-concessional contributions, assuming her Total Superannuation Balance is less than $1.4 million (or the higher indexed amount at that time). For more information about how your Total Superannuation Balance affects your bring-forward cap, see the next section.

Bring-forward rule not available if your TSB is greater than $1.6 million

Super alert! Further, since July 2017, Australians are also subject to the Total Superannuation Balance threshold. If a person’s Total Superannuation Balance exceeds the $1.6 million threshold (for the 2017/2018 year or for the 2018/2019 year), his or her bring-forward cap drops to nil. For more information about the concept, Total Superannuation Balance, see the following SuperGuide articles:

• Total Superannuation Balance: 7 reasons why your TSB matters
• Super contributions: Bring-forward rule and your Total Superannuation Balance

For more information…

For more information about the latest non-concessional contributions rules, see the following SuperGuide articles:

• Your 2018/2019 guide to non-concessional (after-tax) contributions
• New normal: $100,000 non-concessional contributions cap
• Non-concessional contributions: 10 facts about the $100,000 cap
• Bring-forward rule: A definitive super guide
• After-tax super contributions: Beef up using a bring forward
• Super contributions: Bring-forward rule and your Total Superannuation Balance
• Total Superannuation Balance: 7 reasons why your TSB matters
• 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
• For over-65s: Ten tips when making super contributions