The use of the bring-forward rule with non-concessional contributions (NCC) has certainly been a popular strategy amongst self-managed super fund members, utilised extensively since 1 July 2007 with cash contributions, in-specie asset transfers and re-contributions. Since the inception of these contribution caps, interestingly the non-concessional contribution cap has never indexed from its $150,000 limit, currently calculated as six times the concessional contribution cap. After years of the Government ‘meddling’ with these caps (including a two-year freeze on indexation), it was pleasing to see for 2014-15 the contribution caps on the rise.
For members looking to utilise the bring-forward rule, the indexation of the caps highlights the importance of timing when deciding to trigger this three-year window. For a member that triggers the amount in the current 2013-14 financial year or is currently within their bring forward period, it is important to note that a member does not benefit from the indexation of the contribution caps. To help understand this better, lets look at the following example:
Non-concessional contribution example
Keith made a $400,000 non-concessional contribution into his SMSF during the 2012-13 financial year, triggering the bring forward rule. This meant that he has triggered his ‘bring forward’ rule with his non-concessional contribution cap and cannot contribute more than $450,000 during the period 1 July 2012 to 30 June 2015 inclusive (without an excess contributions tax penalty). On 1 July 2014, Keith advises that he wishes to make a further contribution of $140,000, taking him up to the new indexed non-concessional contribution cap ($540,000). As Keith triggered the bring forward prior to the indexation of the caps, his is restricted during the three-year window to $450,000. From 1 July 2015, Keith would be eligible for the higher $180,000 NCC cap and trigger a new bring forward rule.
As you can see from the above, the timing of your contributions for the remainder of the financial year can be important for those wishing to maximise the amount of contributions in their fund, or even through strategies such as re-contributions.
As they say… it is all in the timing!
SMSF Tax Planning webinar
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