Non concessional contribution

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New Contributor
Posts: 4
Registered: ‎18-09-2016

Non concessional contribution

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I turned 65 on 17th may 2016 and was going to use the bring forward rule, however budget night put a stop to it. Does that mean I lost the opportunity fto contribute forever? I am self employed managing two properties out of super and four commercial property in super, if I have to use the work rule would I qualifying?

SuperConcepts expert
Posts: 9
Registered: ‎14-03-2016

Re: Non concessional contribution

Taking into consideration the Federal Government's announcement of dropping of the proposed $500,000 lifetime limit for non concessional contributions, for the current 2016/17 financial year, as you are over age 65 (but under age 75), the maximum non concessional contribution you can make is $180,000 (assuming you have not previously trigerred the 3 year bring foward rule in the prior two financial years). You cannot use the 3 year bring forward rule in the current 2016/17 financial year as you are not under age 65 at any time in the 2016/17 financial year. Unfortunately, the 2015/16 financial year was the last year you can have triggered the 3 year bring forward rule (as your turned 65 in that year).

 

Further, as you have turned 65, you will need to meet the 'work test' prior to the fund accepting any contributions from you. The 'work test' requires you to be 'gainfully employed' for at least 40 hours in 30 consective days. The management of 2 (non super owned) rental properties may not be enough for you to meet the definition of being 'gainfully employed'. This needs to be looked at further. 

 

The latest proposed change to the non concessional contributions rules, if passed, will mean that from 1 July 2017 the annual cap for non concessional contributions will be reduced to $100,00. A person under 65 in the financial year will still be able to utilise the 3 year bring forward rule, however, where a person's total superannuation is more than $1.6m, as at the last end of financial year (30 June), they will not be able to make any non concessional contributions. We await draft legislation on this proposal and passage through both houses.

 

So, to answer you question, you have not lost the ability to make non concessional contributions to super. However, you will not be able to utilise the 3 year bring forward rule and prior to making a non concessional contribution you must satisfy the 'work test'. Once you turn 75, you can no longer make non concessional superannuation contributions.

New Contributor
Posts: 4
Registered: ‎18-09-2016

Re: Non concessional contribution

Thank you for a most succinct advice. It doesn't seem fair that a budget night announcement subsequently abandoned has percluded me from making a bring forward rule contribution, since I don't appear to qualify under the work rule I cannot make any further contribution. A special dispensation should be made for those disqualified on budget night. Also I wonder if the industry has made submission to vastly simplify the pension and accumulation split post 2017. The include or exclude dilemma cause much concern. Why don't they just use porportioning rule? If I have $3.2 m in super than 50% of the income is taxable, it is that SIMPLE. No need for actuaries, no need to split assets. 

Contributor
Posts: 45
Registered: ‎03-12-2015

Re: Non concessional contribution

Hi Bernchin

 

your idea of taxing 50% of the income on the example balance of $3.2m after 1 July 2017 while simple may disadvantage you in the longer term. As the $1.6m is a transfer limit that means that after moved to pension it can continue to grow beyond this limit. So by only taking minimum pensions and the remainder of your living expenses from accumulation you could end up after say 5 years with $2m in pension and $1.2m in accumulation. Would you still favour tax on 50% of your balance?

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