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Non-concessional Contributions – Super Reform

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By Access Super Audit
27/02/2017
SMSF Contributions, SMSF Featured

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.

Filed Under: SMSF Contributions, SMSF Featured

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