Author: Emma Partenza, Manager, TAG Financial Services
How much can I contribute if I haven’t fully utilised my bring forward NCC Cap?
What happens if a member triggered but doesn’t fully utilise their bring forward Non-Concessional Contribution (NCC) cap, and in the following financial year, they wish to utilise the balance? However, their Total Superannuation Balance (TSB) has increased (or decreased), which would place them into a different tier of the bring forward cap structure. How much can they contribute? Does their bring forward cap change?
In many cases, if a member triggers their bring forward non-concessional contribution cap it is generally fully utilised in the first year. On occasions this may not be the case, so what impact, if any, does this have on any unused bring forward contributions, especially where the member’s total super balance changes substantially.
Since 1 July 2017, being eligible to make a non-concessional contribution into super is determined by your total super balance (on the 30 June of the prior financial year). Your total super balance determines the amount of non-concessional contributions you may bring forward and the period in which you can make these contributions into super. A tiered basis applies for bring forward contributions where a member’s total super balance is between $1,400,000 & $1,600,000.
Example
Sue (58) and Arthur (61) have been running their own self-managed superannuation fund, and in planning for their retirement have decided to make a non-concessional contribution each during the 2020 financial year of $210,000 and $185,000 respectively. Sue and Arthur’s total super balance as at 30 June 2019 was $1,217,500 and $1,395,000.
Both members triggered the bring forward cap of $300,000 (for a 3-year period).
| TSB 30/06/19 | NCC made FY2020 | Bring Forward Cap | Unutilised bring forward cap | TSB 30/06/20 | |
| Sue | $1,217,500 | $210,000 | $300,000 3 years | $90,000 | $1,498,000 |
| Arthur | $1,395,000 | $185,000 | $300,000 3 years | $115,000 | $1,659,000 |
Sue and Arthur wish to make a further contribution in 2021 to utilise their bring forward non-concessional contributions cap. Their total super balance, as at 30 June 2020, must be re-assessed to determine their eligibility to make non-concessional contributions during the current financial year, even where they have previously triggered the bring forward cap.
Based on their total super balances at 30 June 2020, Arthur has exceeded his cap preventing him from being able to make a contribution in 2021, whilst Sue’s total super balance has pushed her into the next tier in the bring forward contribution rules. If Sue had not previously triggered the non-concessional contribution bring forward rule in the previous year (2020), and instead triggered it in 2021, her bring forward period would be 2 years and she could only contribute $200,000.
So, would this mean that Sue cannot contribute anything further in 2021?
Does her total super balance as at 30 June 2020 mean she is now subject to a different level of bring forward limits or can she still utilise her unused non-concessional contributions triggered in the prior year (2020)?
The Income Tax Assessment Act 1997 provides clarity on the level of contributions that can be made for the second year is if your total super balance immediately before the start of the second year is less than the general transfer balance cap for the second year, and your non-concessional contributions for the first year fall short of your cap for the first year then the shortfall. Otherwise it is nil.
Currently the general transfer balance cap is $1,600,000. The member’s total super balance in subsequent years of the bring forward period is being assessed against $1,600,000. Where their total super balance has not exceeded $1,600,000 and they have not fully utilised their bring forward contributions, they are eligible to contribute the remaining (unutilised) portion into super, providing the bring forward period has not expired.
Example continued…
In the example above, Sue’s total super balance at the beginning of year 2 is $1,498,000. As this is less than $1,600,000 (general transfer balance cap) she can contribute the unused portion of her bring forward contributions of $90,000. Non-concessional contributions are not being compared to those with a total super balance of between $1,400,000 & $1,500,000 under the bring forward rules; which would result in a lower contribution of $200,000 in a 2-year period.
Arthur’s total super balance exceeds $1,600,000 in year 2 and therefore he is ineligible to make a non-concessional contribution in 2021, even though he has an unused portion of his bring forward cap. This will carry forward to year 3 to be utilised if his total super balance falls below $1,600,000. If not, the unused balance would be lost.
Should Arthur’s total super balance reduce at 30 June 2021 to $1,587,000, he would again be able to utilise his unused bring forward contributions in year 3. He would be eligible to contribute $115,000 and could fully utilise his $300,000 bring forward non-concessional contribution cap triggered in 2020. The unused portion has carried forward during the bring forward period, in the event Arthur was eligible to use it by year 3.
Even though a member’s total super balance will change each financial year, where the bring forward cap has been triggered by the member in one financial year, eligibility to utilise the remaining cap during the bring forward period is based on assessing the member’s total super balance against the general transfer balance cap in years 2 and 3. The member’s eligibility is not assessed against their total super balance and falling into a new tier under the bring forward provisions, which could cause the member to exceed their contribution limits.
NOTE: From 1 July 2021, the General Transfer Balance Cap, and therefore the TSB increases to $1,700,000 due to indexation. Eligibility to make a non-concessional contribution will be measured against these new thresholds. In addition, there are changes to the contribution caps and the bring forward thresholds, which are detailed in our previous blog.
If you have any questions, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.