Bring-forward Rule

The bring-forward rule is a provision that allows you to make non-concessional contributions (after-tax contributions) amounting to more than the contributions cap of $180,000 (FY 2016/2017) over a three-year period in the First Year by bringing forward the caps of the next 2 years. However, this rule only applies if you are under the age of 65.

Bring-Forward Provision for People Under 65

If you are 64 years old or under and you make excess non-contributions, the bring-forward rule will automatically be triggered and bring forward the next two years’ non-concessional contributions – but certain conditions apply. This means:

  • If the bring-forward rule is triggered prior to 1 July 2017, the total amount of non-concessional contributions you can make to your SMSF over a three-year period is $540,000.
  • On the other hand, if the bring-forward rule is triggered after 1 July 2017, you can make a total of $300,000 over a three-year period as your non-concessional contributions.

When the after-tax contributions (non-concessional contributions) made to your SMSF exceed $180,000 (contributions cap for FY 2013/2014), the bring-forward rule is automatically triggered. Once this happens, the normal non-concessional contributions cap does not apply to the next two years. However, the total non-concessional contributions for the three-year period cannot exceed $540,000 (FY 2016/2017); or $300,000 (FY 2017/2018).

If you make any more non-concessional (after-tax) contributions to your SMSF, you will have to pay excess non-concessional contribution tax.

Note:

  • Excess concessional contributions (before-tax contributions) count towards the non-concessional contributions cap and can trigger the bring-forward provision.
  • Life insurance premiums and fund fees can count as contributions.

During the transitional periods, contributions made prior to 1 July 2017 will affect your total non-concessional contributions capacity over the following two years.

For more info on how much you can contribute to your SMSF and the applicable tax rate for a certain age, please see the ATO website by clicking here.

Bring-forward rule for individuals who are turning 65

The bring-forward rule is not applicable for those who are aged 65 or over. The maximum amount an individual aged 65 or over can contribute is $180,000 (FY 2016/2017) or $100,000 (FY 2017/2018). In addition, in order to make contributions to your SMSF, you are required to satisfy the work test. Excess non-concessional contributions should be withdrawn from the SMSF; otherwise the excess amount will be taxed at the highest tax rate – 46.5%, in your personal capacity.

  • Before you turn 65
    If you are aged 64 years or younger on 1 July 2017, you can take advantage of the bring-forward rule for the entire Financial Year. This means that you can make a $540,000 non-concessional contribution in the Financial Year that precedes the year in which you turn 65, assuming that the bring-forward rule has not been triggered in previous years.
  • After you turn 65
    If you were 64 years old or less on 1 July 2017 and you turn 65 during that year, you can still make contributions to the SMSF. You are required to satisfy the work test before making such contributions (either concessional contributions or non-concessional contributions).

General questions around the bring-forward provision

The following points are aimed at helping the Australians who are still confused about how the bring-forward provision works and how to use it the greatest advantage.

Bring-forward rule – for couples in an SMSF

The bring-forward applies to each Member of the SMSF. Each Member can potentially contribute up to $540,000 (FY 2016/2017) or $300,000 (FY 2017/2018) in the first year if the bring-forward rule is triggered. However, the bring-forward rule only applies to those under 65 years of age.

Catch-up with contributions cap in Year 3

The bring-forward rule only applies to future years’ contributions. Hence, you will not be able to contribute $540,000 in the last year. If you fail to utilise your non-concessional cap for one or more years, then the cap for those years are gone forever.

The correct of using the bring-forward provision

The bring-forward provision allows you to maximise your total non-concessional contributions for a total of $540,000 (FY 2016/2017) or $300,000 (FY 2017/2018) in Year 1, rather than over a three-year period. However, in order to gain maximum benefit from it, it is important that you understand how the rule works.

For example:

In year 1, you make non-concessional contributions for a total of $200,000 during the FY 2016/2017. As the amount you contribute to the SMSF is over the contributions cap, the bring-forward rule will automatically be triggered, allowing you to bring over the contributions cap for the next 2 years (Year 2 and Year 3). However, as the cap for a three-year period is only $300,000 for FY 2017/2018, in Year 2 and 3, you are only allowed to contribute up to $100,000 to stay within the cap. If you contribute more than $100,000, you will then be liable for the excess contribution tax on the excess amount.

If you want to contribute more than $100,000 then you would need to wait until Year 4, when the bring-forward is reset, then you can contribute more into the SMSF.

For more info on how you can utilise the bring-forward, please see here.

 

 

 

  • Jay Lee

    Currently I have a client who NCC overfunded and need to be
    withdrawal the overfunded amount in financial 2015. I acknowledged the
    2014-2015 budget is reforming the excess NCC tax but the draft not approved
    yet. The superfund NCC overfunded in July 2014.

    Do you know when will be the legislation will be effective?
    So we wait?

    I will like to have your opinion what we can advise to the
    client what can be done at the moment to minimise their excess NCC tax on the
    overfunded amount?

    Many thanks.

    • superannuationwarehouse

      Jay,

      The first thing I would do is to use the bring-forward rule. This means $540k can be added to the Fund as a NCC.

      If this is not enough, add some of the NCC to the second Member in the Fund. This should fix the issue.

      Trust this solve your problem. This should eliminate any NCC tax.

      • Jay Lee

        Thanks.

        The fact now is bring forward rule is utilized and only one member in the fund. The NCC is still over funded at the moment. Please advise.

        • superannuationwarehouse

          Ouch… In this case the Trustee will have some extra tax to pay in the SMSF. This hurts.

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