More Australians can make up to three years’ worth of non-concessional super contributions in the same financial year, with the government making this option available to individuals up to the age of 75.
Individuals aged up to 75 are able to make up to three years of non-concessional super contributions under the bring-forward rules. Previously, bring-forward rules only applied to those under age 67.
Below we explain what non-concessional contributions are, where bring-forward rules come into it, why this could be good news for you and what other rules have changed for this age group in recent times.
What are non-concessional contributions?
Non-concessional contributions are voluntary contributions you can make using after-tax dollars (such as when you transfer funds from your bank account into your super), which you don’t claim a tax deduction for.
Currently, the annual non-concessional contributions cap is $110,000.
Apart from non-concessional contributions, there are also concessional contributions and limits to the amount of both types of contributions you can make each year.
What are the bring-forward rules?
The bring-forward rules apply to non-concessional contributions only.
These rules allow you to make up to three years of non-concessional contributions in a single income year, if you’re eligible. This means you can put in up to three times the annual cap of $110,000, which means you may be able to top up your super by $330,000 within the same financial year.
However, how much you can make as a non-concessional contribution will depend on your total super balance as at 30 June of the previous financial year. More on this below.
How could the bring-forward rules benefit me?
If you’ve reached your concessional contributions cap, received an inheritance, or have money from the sale of a large asset, non-concessional contributions may be a good way to top up your super.
However, contribution caps limit the amount you’re able to put into super in a single year, which is where bring-forward rules may be helpful, as they could allow you to make a much larger non-concessional contribution, or more non-concessional contributions, than you’d otherwise be able to make in 12 months.
How does my total super balance cap affect bring-forward rules?
Your total super balance may impact your ability to contribute up to three years of non-concessional contributions under the bring-forward rules.
Currently, your total super balance must be below $1.48 million, as at 30 June of the previous financial year, for you to be able to contribute up to three years of annual caps ($330,000) under the bring-forward rules.
If your total super balance rises above this level, your ability to bring forward future year caps may be reduced, or no longer available at all, meaning only the standard annual cap (or no cap at all) may be available.
See the table below to get an idea of what you may be able to contribute under the bring forward rules.
Your total super balance cap on previous 30 June
Your non-concessional contribution limit
Under $1.48 million
$1.48 million – $1.59 million
$1.59 million – $1.7 million
One year / standard annual cap
Equal to or above $1.7 million
Some useful numbers
Annual concessional and non-concessional contribution caps. Concessional contributions – for most people – are limited to $27,500 a year. As a side note, concessional contributions include SG contributions and salary sacrifice contributions (if you’re still working) and tax-deductible personal contributions. If eligible ‘catch-up’ concessional contributions where you access unused cap amounts from previous years may also be available.
More super can be transferred into a retirement pension
The amount of super that can be transferred into a retirement pension (regardless of how many pension accounts you might have) is $1.7 million – but not for everyone.
How much you can transfer comes down to whether you moved money from your super account into a retirement pension before 1 July 2021 and how much you might’ve moved. Get the full picture.
Fewer people have to meet the work test
Since 1 July 2022, super fund members under 75 years of age are able to make or receive personal contributions and salary sacrificed contributions without meeting the work test, subject to existing contribution cap limits. They may also be able use the bring forward rule.
A work test (or the ‘recent retiree’ work test exemption) now only applies to people aged 67 to 74 if they wish to claim a tax deduction on contributions. Under the work test you must have worked at least 40 hours over 30 consecutive days in the financial year. Under the new rules, the work test can be met in any period in the financial year of the contribution. This is different to the previous rules, where the work test must be met before contributing. For details on the work test exemption, read more here.
More people can receive spouse contributions
The government also increased the cut-off age for spouse contributions from 70 to 75 from 1 July 2020. This means a receiving spouse can build their super for longer.
Note, contributions received by a spouse also count toward their non-concessional contributions cap. Other rules also apply. Find out more about spouse contributions.
What other things should I be across?
If you exceed super contribution caps, additional tax and penalties may apply. The value of your investment in super can also go up and down, so before making extra contributions, make sure you understand, and are comfortable with, any potential risks.
Talk to us to find out how your super can work harder for you.
Source: AMP July 2022
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