If you’re nearing retirement, you’d be thinking about the money you have in your super to help support your life after you finish working. If you’ve received an inheritance or sold a significant asset, you could consider putting the money into your superannuation account.
Many people struggle to maximise their superannuation contributions because of contribution caps. But, by using what’s called the bring-forward arrangement, you could be eligible to transfer a large sum of money into your super account.
What is the bring-forward rule?
The bring-forward rule, introduced by the Australian Taxation Office (ATO), allows individuals under 65 to make non-concessional or after-tax contributions to their superannuation.
Under the rule, you can contribute up to an amount equal to three years worth of contributions within a single income year. What this means is that, if your current annual non-concessional contribution cap is $100,000, you can contribute up to $300,000 in one financial year without having to pay extra tax.
If you choose to use this rule, you’re ‘bringing forward’ the next two years worth of caps into the current year.
Who is eligible to use the bring-forward rule?
Two factors determine if you’re eligible for the bring-forward rule; the total balance in your super and your age. The bring-forward rule is only applicable for people who have under $1.5 million in their super account. You also need to be, as per the ATO, below the age of 65 for at least one day in the year that you use the bring-forward rule.
It is also important to remember that you’ll need to satisfy the work test after turning 67 years old if you want to make any voluntary super contributions. To qualify for the work test, you need to work for at least 40 hours over 30 consecutive days. This applies from the 2020-2021 financial year and onwards.
How many times can you use the bring-forward rule?
The number of times you’re eligible to use future-caps depends on the total balance in your super at the end of the previous financial year.
According to the ATO, the total balance in your super must be less than the general transfer balance cap, which is $1.6 million as of 2017-18. You should also have the ability to make a greater contribution than the annual non-concessional contribution cap, which is currently $100,000 per financial year.
So, essentially, to use the bring-forward rule, your total super balance needs to be below $1.5 million at the end of the previous financial year.
Below is a table that represents the bring-forward arrangement and the caps that need to be followed for the first year.
|Total super balance on 30 June of the first year||Non-concessional contributions cap||Bring-forward period|
|Less than $1.4 million||$300,000||3 years|
|$1.4 million to less than $1.5 million||$200,000||2 years|
|$1.5 million to less than $1.6 million||$100,000||No bring-forward period will be applicable, general non-concessional contributions caps need to be followed|
|$1.6 million and more||NIL||NA|