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In the run-up to retirement, putting some extra money into your super account can be a sensible idea. The same goes if you are lucky enough to receive an inheritance or sell a large asset.
But the contribution caps (or limits) can make it tricky to get a large amount of money into your super account in a single year.
One solution can be to use a bring-forward arrangement. To help you understand how this works, SuperGuide has put together an easy explainer covering the key rules.
What is a bring-forward arrangement?
Although it sounds complicated, bring-forward contributions are just what they sound like – you bring forward your non-concessional contributions caps (or limits) from future years and use them in a shorter time period.
Need to know
Non-concessional contributions into your super account are made from your after-tax income. These contributions are not taxed in your super fund, but the associated investment earnings are taxed at 15%.
The bring-forward rules allow you to advance your contributions caps from a three-year period and use them over a shorter period – either all at once or as several larger contributions.
Since 1 July 2017, the annual non-concessional (after-tax) contributions cap is $100,000. The bring-forward rules allow you (if you meet all the eligibility criteria) to make non-concessional contributions of up to three times the annual contributions cap in a single year (3 x $100,000 = $300,000 in 2020/21).
Once you trigger a bring-forward arrangement in a particular year, any change to the non-concessional contributions cap during the following three-year period will not apply to you, so you are unable to take advantage of any increase (or decrease) in the contributions cap.
Need to know
Bring-forward arrangements are different from carry-forward contributions.
Carry-forward contributions allow you to use any of your unused concessional (before-tax) contributions cap on a rolling five-year basis.
Bring-forward arrangements, on the other hand, are for non-concessional contributions. For more information, see SuperGuide article Carry-forward contributions: How to use your unused contribution caps to boost your super.
Who is eligible to use a bring-forward arrangement?
If you want to use the bring-forward rules, you need to check you meet all of the eligibility criteria before you make your contribution:
1. $1.6 million total superannuation balance
To make any non-concessional contribution, your total superannuation balance (TSB) must be less than $1.6 million on 30 June of the financial year before the one in which you want to make your contribution.
If your balance is close to $1.6 million, you will only be able to make a contribution and bring forward the contribution caps from future years that take your TSB to $1.6 million.
| Total superannuation balance | Contribution and bring-forward available |
|---|---|
| Less than $1.3m | 3 years of caps ($100,000 x 3 = $300,000) |
| $1.3m to less than $1.4m | 3 years of caps ($100,000 x 3 = $300,000) |
| $1.4m to less than $1.5m | 2 years of caps ($100,000 x 2 = $200,000) |
| $1.5m to less than $1.6m | 1 year of caps ($100,000 x 1 = $100,000) |
| $1.6 million | Nil |
2. Age limits
If you are aged under 65 on 1 July of the financial year, you can make non-concessional contributions up to the annual cap ($100,000 in 2020/21) and also use the bring-forward rules. You are not required to be working.
If you trigger a bring-forward arrangement in a financial year and subsequently reach age 65 during the three-year bring-forward period, you will need to meet the requirements of the work test or work test exemption if you want to make additional contributions. (See box below for rules during 2020.)
For example, if you contribute $200,000 in Year 1 at age 63 and then turn 64 in Year 2 and would like to contribute another $50,000 in that year and another $50,000 in Year 3 at age 65, you will need to meet the requirements of the work test or work test exemption in the third year when making your final bring-forward contribution. For more information, see SuperGuide article Work test: Making super contributions over 67.
If you are aged 65 to 74 on 1 July of the financial year, you are not permitted to start a bring-forward arrangement and you are limited to the normal non-concessional cap ($100,000 in 2020/21). (See box below for rules during 2020.)
If you are aged 75 and over on 1 July of the financial year, generally you are not permitted to make a non-concessional contribution, so you cannot use the bring-forward rules.
Need to know
Until 30 June 2020, once you reached age 65 you needed to meet the requirements of the work test or work test exemption if you wanted to make non-concessional contributions into your super account.
Amendments to the SIS Regulations have lifted this age limit to 67.
This means from 1 July 2020 if you are aged under 67, you can make personal or non-concessional contributions into your super account without needing to meet the work test requirements. Once you reach age 67 you will still be required to meet the work test or use the one-off work test exemption.
Unfortunately, accompanying legislation covering the bring-forward rules is currently before the House of Representatives and is yet to be passed and enacted into law. This new legislation will allow fund members aged 65 or 66 to access the bring-forward provisions in the same way as fund members aged 64 and younger.
4. Triggering bring-forward arrangement
If you want to start making a bring-forward contribution in a particular financial year, you must not have already triggered a bring-forward arrangement in the previous two years.
It’s possible to accidentally trigger a bring-forward arrangement in a previous financial year without realising it. Before making personal contributions into your super account, consider all the contributions you have made to all your super funds, as excess concessional (before-tax) contributions are also counted towards your non-concessional contributions cap.
Case study
Carl is aged 52 and his total superannuation balance is currently $650,000, but he would like to boost his retirement savings in the years before his planned retirement at 61.
Carl decides to sell an investment property he owns and then makes a non-concessional contribution into his super account of $280,000 from the proceeds during October 2019.
As Carl has exceeded his normal annual non-concessional contributions cap of $100,000, he automatically triggers the bring-forward rules by making this large contribution. As he has triggered a bring-forward arrangement, Carl can make a further non-concessional contribution of up to $20,000 in 2020/21 or 2021/22 if he wishes to use up his full $300,000 three-year cap.
In 2022/23, Carl’s non-concessional contributions cap will reset and if he is eligible he can make further non-concessional contributions up to the current annual contributions cap.
How do I start a bring-forward arrangement?
Starting a bring-forward arrangement is easy.
You don’t need to notify your super fund or the ATO, or even fill in an application, as your super fund automatically reports all contributions made into your super account to the ATO.
If you are eligible to make non-concessional contributions and you make contributions greater than the annual cap ($100,000 in 2020/21), you automatically gain access to your future year contributions caps. This is referring to as triggering the bring-forward rules.
Background of the bring-forward caps
Over the years the government has progressively reduced the non-concessional contributions cap and bring-forward limits. If you started a bring-forward arrangement in 2014/15, for example, the bring-forward cap was $540,000, which is much higher than the current $300,000 limit.
The table shows the non-concessional caps available in previous years:
| 2014/2015 | 2015/2016 | 2016/2017 | 2017/2018 | 2018/2019 | 2019/2020 | |
|---|---|---|---|---|---|---|
| Annual contribution cap | $180,000 | $180,000 | $180,000 | $100,000 | $100,000 | $100,000 |
| Maximum contribution permitted over 3-year period under contributions rules applying at that time | 0 to $540,000 | |||||
| 0 to $460,000 | ||||||
| 0 to $380,000 | ||||||
| 0 to $300,000 | ||||||
Source: ATO
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