Non-concessional Contributions – Super Reform

New Non-concessional Contribution Cap

The annual Non-concessional Contributions (NCC) cap for 2017-18 is reduced to $100,000 from $180,000 in 2016-17 and 2015-16 financial year.

The annual Non-concessional Contributions cap is four times the annual concessional contributions cap. (100,000=4*25,000)

An individual must have a total superannuation balance of less than the general transfer cap on 30 June of the previous year to be eligible for non-concessional contributions. For example, Amanda has $600k in accumulation and $1m in pension on 30 June 2017; in 2017-18 year, she can’t make any non-concessional contributions. Even her transfer balance is only $1m.

There is incentive for Amanda to take a small amount of money out from her $1.6m balance before 30 June 2017 to be eligible for a $100k Non-concessional Contribution in the following year.

In the above example, if Amanda’s total superannuation balance is $1.5m or $1.55m, or $1.59m, on 30 June 2017, her NCC for 2017-18 is $100k.

The bring forward rules work with the same principal, if Amanda’s total superannuation balance is $1.4m, or $1.45m, or $1.49m, she can trigger a two-year bring forward period. Her NCC cap for 2017-18 is $200k. If Amanda’s total superannuation balance is below $1.4m, she can trigger a three-year bring forward period. Her NCC cap for 2017-18 is $300k.

Basically we are working with just below $1.7m in any scenario.

Transitional arrangements for those triggered the bring forward rule in 2015-16 and 2016-17

If a bring forward rule is triggered in 2015-16, before the new legislation, the bring forward amount in 2015-16 is $540,000 ($180,000*3).  If all the $540,000 has been contributed by 30 June 2017, then it’s fine. If there is any unused NCC at 30 June 2017, firstly, we assume that the NCC cap in 2015-16 is $460,000 ($180,000*2+$100,000), therefore if the total NCC made by 30 June 2017 is $470,000, there is no eligibility for any NCC in 2017-18. Secondly, to be eligible for any non-concessional contribution, one’s total superannuation balance should be below $1.6m.

Similarly, if a bring forward rule is triggered in 2016-17, the bring forward amount is still $540,000 in 2016-17.  In 2017-18 and 2018-19, we will work with a new reduced $380,000 cap ($180,000+$100,000*2). However, when total superannuation balance at 30 June 2017 or 30 June 2018 is above the general transfer balance cap, eligibility for NCC in the next financial year is lost.