As of 1 July 2017, there is a significant reduction in the Non-Concessional Contribution cap compared to previous years. The reduction in the Non-Concessional Contribution cap is another measure aimed at reducing the effective tax concessions available for wealthier individuals.
A Non-Concessional Contribution is an after-tax contribution made into superannuation. Unlike a Concessional Contribution, a tax deduction cannot be claimed for a Non-Concessional Contribution. Non-Concessional Contributions form part of the ‘tax-free component‘ of your superannuation savings.
While a Non-Concessional Contribution does not provide any immediate tax deduction, all earnings within the superannuation environment are taxed at a maximum of 15%, which is usually lower than a person’s marginal tax rate, had the same amount been invested in an individual’s personal name.
The Non-Concessional Cap in the 2016/2017 financial year is $180,000; however will reduce to $100,000 p.a. from 1 July 2017.
| Financial Year | Non Concessional Cap |
|---|---|
| 2017-18 | $100 000 |
| 2016-17 | $180 000 |
| 2015-16 | $180 000 |
| 2014-15 | $180 000 |
| 2013-14 | $150 000 |
| 2012-13 | $150 000 |
| 2011-12 | $180 000 |
| 2010-11 | $180 000 |
| 2009-10 | $150 000 |
| 2008-09 | $150 000 |
Excess Contributions Tax applies to Excess Contributions.
Non-Concessional Contribution Cap 2017/2018 Bring Forward Rule
The Non-Concessional Contribution Cap Bring Forward Rule allows you to bring forward two years’ worth of the contribution cap – allowing you to contribute up to 3 times the annual cap amount at any stage over a 3-financial year period, while disregarding the annual cap in each year.
For example, as of 1 July 2017, the Non-Concessional Contribution cap is $100,000. Therefore, $300,000 can be contributed over a 3 year period at any stage. Some examples are shown in the table below:
| 2017-18 | 2018-19 | 2019-20 |
|---|---|---|
| $300 000 | - | - |
| $150 000 | $150 000 | - |
| $180 000 | - | $120 000 |
| $110 000 | $60 000 | $130 000 |
The Non-Concessional Contribution Bring Forward Rule is automatically triggered in a year that the annual Non-Concessional Contribution cap is exceeded.
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You are only able to utilise the Bring Forward Rule in a financial year that you were aged 64 or lower for at least one day. As such, the Bring Forward Rule cannot be employed by a person aged 65 or higher for the full financial year.
Bring Forward Rule Transitional Caps
Some Non-Concessional Contribution transitional caps have been put in place to cater for the significant reduction in caps between the 2016/17 and 2017/18 financial years.
If the Bring Forward Rule was triggered in either the 2015/16 or 2016/17 financial years, the following Bring Forward Rule Transitional Caps will apply:
| 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
|---|---|---|---|---|
| More than $460K | Nil Contributions | End of transition period $100k or 3yr bring forward | - | |
| More than $180K but less than $460k | Cannot exceed $460k from 2015-16 to 2017-18 | End of transition period $100k or 3yr bring forward | - | |
| - | More than $380k | Nil Contributions | Nil Contributions | End of transition period $100k or 3 yr bring forward |
| - | More than $80k but less than $380k | Cannot exceed $380k from 2016-17 to 2018-19 | End of transition period $100k or 3yr bring forward | |
Non-Concessional Contribution Cap Age Limit
Non-Concessional Contributions can be made by anyone under age 65 without restriction. If you are between 65 and 74, you are eligible to make Non-Concessional Contributions provided you meet the superannuation work test.
The superannuation work test requires you to work at least 40 hours over a 30 consecutive day period prior to the contribution being made. Once you reach age 75, you are no longer able to make Non-Concessional Contributions into your superannuation account.
Non Concessional Contribution Maximum Balance
As of 1 July 2017, you are unable to make Non-Concessional Contributions to superannuation if your total superannuation balance (including pensions) exceeds $1.6 million.
Further, if your balance is greater than $1.6 million on 30 June of each year, your Bring Forward Rule cap is reduced to zero in the following year, as shown below (source ATO):
| Total Superannuation Balance | Contribution and Bring Forward Available |
|---|---|
| Less than $1.4M | Access to $300 000 cap (over 3 years) |
| Greater than or equal to $1.4M and less than $1.5M | Access to $200 000 cap (over 2 years) |
| Greater than or equal to $1.5M and less than $1.6M | Access to $100 000 cap (over 1 year) |
| Greater than or equal to $1.6M | Nil |
Tax on Non-Concessional Contributions
Non-Concessional Contributions enter your superannuation account completely tax free and are not included as assessable income to your superannuation fund. No Contributions Tax is payable on Non Concessional Contributions.
Extra tax may be payable for exceeding the non-concessional contributions cap.
Non-Concessional Contributions also exit your superannuation/pension account tax free upon withdrawal.
No tax is paid on the Non-Concessional (tax-free) component of your superannuation balance, regardless of whether it is paid to you as a recipient or paid to your nominated beneficiaries as a death benefit if you were to pass away.
