What does the ‘Bring-Forward’ rule mean?
Who can use it?
There were multiple changes in superannuation last year, many in relation to non-concessional super contributions. In particular, as we reported, the ages at which different types of contributions can be made are now lower. Requirements around the Work Test have also been relaxed, in this case with the age being increased.
Overall these changes are very positive for older Australians hoping to maximise their retirement income. It means they can transfer more of their savings into lower tax environments.
But these frequent changes can lead to confusion on how the new rules might apply in your own personal circumstances.
Today we explain the new rules on ‘bring forward’ contributions and how they might fit with overall retirement income strategies.
What is the Bring-Forward arrangement?
These arrangements are available to those who wish to make contributions above the annual non-concessional contributions cap, by giving them access to future year caps. The extra non-concessional contributions can mean you are not paying extra tax.
Who is eligible?
Eligibility for the bring-forward arrangement depends upon two things:
- your age
- your total super balance on 30 June of the previous financial year.
How does it work?
For those under 75 years of age (at any time in a financial year) they may be able to make non-concessional contributions of up to three times the annual non-concessional cap in that financial year. ($110,000 by three times, totalling $330,000)
For those who are 75 years or older, your contributions to super may be limited to employer contributions and downsizer contributions.
How the government defines this rule
Here’s how the ATO explains the Bring-Forward arrangement:
From 1 July 2021
The amount of the non-concessional contributions cap you can bring forward is either:
- 3 times the annual non-concessional contributions cap over 3 years (that is, $330,000) if your total super balance on 30 June of the previous financial year is less than $1.48 million
- 2 times the annual cap over 2 years (that is, $220,000) if your total super balance on 30 June of the previous financial year is above $1.48 million and less than $1.59 million
- nil ($0) if your total super balance is $1.59 million or above.
These limits are based on the:
- non-concessional contribution cap of $110,000
- total super balance in relation to the general transfer balance cap of $1.7 million***.
*** It is worth remembering that the general Transfer Balance Cap of $1.7 million is likely to increase to $1.9 million on 1 July this year, due to indexation.
Is this the same as ‘downsizer’ contributions?
Where confusion can enter the picture is when the bring-forward arrangement is used after the sale of the family home. Many retirees and pre-retirees are now considering the efficacy of downsizing since the 1 January legislative change on using any proceeds to top up super. Essentially the age at which the ‘downsizer’ contributions can be used is now 55. ‘Downsizer’ legislation allows you to make a one-off superannuation contribution post-tax, up to $300,000 per individual. Combining ‘Bring-Forward’ and ‘downsizer’ allowances means an individual may be able to contribute up to $630,000 in any one year. But there may also be Centrelink means test implications if you receive or hope to receive an Age Pension.
Tips and Traps
The rules regarding ‘Bring-Forward’ arrangements are complex, but even more so for couples. That’s because it is important to consider whose super account should be used for any extra non-concessional contributions as there are many tax implications, depending upon the age of a partner and whether their super is in accumulation or decumulation mode.
As noted above, there are often also Centrelink implications for asset thresholds when your super nest egg is upsized.
Look before you leap
Making sizeable contributions to super is a major financial decision and so it is important that you do so only if you can satisfy the following five conditions:
- You know the current rules
- You believe you have interpreted them correctly for your own situation
- You are aware of the tax implications
- You know the deadlines by which you must make any transfers
- You genuinely believe you are not missing any aspect of this strategy
In summary, the relaxation in rules related to non-concessional super contributions – when used judiciously – offers significant benefits to those funding life after work over the course of 20 or 30 years.
Still unsure? If either the bring forward or downsizer strategies are appealing, but you need more support in applying the rules, you may wish to consider a one-on-one consultation with one of our experienced advisers who can help you make sense of the new super rules and how they work with other entitlements.
The bring forward rule does NOT have any personal tax impications.
Hi Mark, than you for sharing your thoughts on our article. Everyone’s financial circumstances are different and although it is possible to take advantage of the ‘Bring Forward’ rule without any tax implications, it is not guaranteed. Anyone who is unsure how they may be impacted should speak with their tax agent to understand their unique situation.
Hi
Providing I have not made any non-concessional contributions for 2 years is it possible on the third year to contribute $330,000 counting for the years missed?
Regards Chris
Hi Chris, thank you for joining the conversation! Unfortunately it doesn’t work that way, if prior years’ caps are not used they are forfeited.
Hi Steven,
How do you define year 1and year 3? When is the start? I thought as long as you are under 75, and your super balance at end of June 30 is less than $1.4m, you can contribute $110k to super in any year, then this becomes the first year, right?
Thanks
Louise
Hi Louise, thanks for your question. Steven is currently on holidays so I’ll do my best to answer for you.
Super contributions sure are tricky as there are a range of different scenarios you can try and work out. If you make a contribution in a financial year which exceeds the annual contribution cap (currently $110,000, increasing to $120,000 from 1 July 2024) then you have triggered the bring forward rule and so that would be year one. Even if you make the contribution on 30th June in that financial year, that is technically the year it was triggered, so it’s year one. The following two financial years are year two and year three. Let me give you an example (assuming I have not previously exceeded my non-concessional contributions cap in previous few years): If I made a contribution of $330,000 today, then I have used up my contributions cap for the financial year ending 30 June 2024, 30 June 2025 and 30 June 2026. Therefore I cannot make any more non-concessional contributions to super until 1 July 2026. Hope this answers your question. All the best, Nicole.
Hi there,
I am 70 and currently receiving a part pension. I intend to sell some shares; transfer funds into my super account and then establish a fortnightly income transferring 270,000 into an account based pension account. If i do this in financial year ended June 2023, will I be able to transfer a further 60K in financial year 2024, with no tax consequences? I understand that I would have to start up an additional account based pension account with the 60k starting balance.
Hi Gary, thanks for your query! We would not be able to give you a simple yes/no answer in this forum as doing so would be considered ‘advice’. Our financial advisers would be able to clarify this and more for you via a consultation. Our financial advice consultations are designed to help you better understand your needs and goals in retirement and some of the actions you can consider to help you achieve those goals. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now.
Hi, if the bring forward provision has been used once, but the 3 year period has since expired, can the bring forward provision be used a second time. For example if $200k was contributed 3 years and and that 3 year period comes to an end on the 1st Aug 2023, could a further $330,000 be contributed – subject to the cap not being breached ?
Hi Mal, thanks for reaching out! It may be possible to use the Bring Forward Rule more than once, but it will depend on your age, total super balance and other specific details relating to your situation. To understand the rules better I would encourage you to make an Advice Consultation appointment with one of our financial advisers who can discuss it in more detail and help provide some clarity around the scenario. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now.
My husband is about to transfer $230 k into my accumulation account from his income stream and I will transfer $100 k approx. into my accumulation account. Will this trigger the ‘bring forward ‘ cap if we do this at different times but before 30 June
Hi Julie, thank you for reaching out! There are a couple of ifs, buts and maybes involved in the situation you have proposed so this would not be an appropriate forum to discuss your details. Our advisers would be happy to have an in-depth discussion to help you fully understand your options and the pros/cons of each via our Advice Consultations. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now.
I always thought that once retired, you couldn’t put any money into super apart from when downsizing. Is there no work rule for these contributions?
Hi Robyn, thank you for reaching out. As always, superannuation rules are continually changing so it is important to keep checking in to make sure you are making the most of your opportunities. From 1st July 2022, the Work Test was removed for Non-Concessional contributions from age 67. However, there is an age limit of 75 to be eligible to make non-concessional contributions into super. If you would like to discuss your individual circumstances in more detail and how this may be of benefit to you, you are able to schedule a consultation here. Thanks, Megan