Private ruling: Non-concessional contributions cap - bring forward provision
Published: April 2014
Date scheme commenced: During the financial year ending 30 June 2015

Ruling: Q1: Can the Taxpayer make non-concessional contributions of $X in the 2014-15 financial year without exceeding the Taxpayer's non-concessional contributions cap amount for the year? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 291-20(2) | Income Tax Assessment Act 1997 Section 292-85 | Income Tax Assessment Act 1997 Subsection 292-85(2) | Income Tax Assessment Act 1997 Paragraph 292-85(3) | Income Tax Assessment Act 1997 Subsection 292-85(4) | Income Tax Assessment Act 1997 Subsection 292-90(1) | Income Tax Assessment Act 1997 Section 960-285 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Summary of decision: The non-concessional contributions cap amount for the 2014-15 financial year is $180,000. However, as the Taxpayer will be under 65 years on 1 July 2014 (the beginning of the 2014-15 financial year) if, at any time in that year, the Taxpayer makes non-concessional contributions in excess of $180,000, bring- forward provisions will be trigged and the Taxpayer's non-concessional contributions cap amount for that year will be $X. Therefore, the Taxpayer can make non-concessional contributions of up to $540,000 in the 2014-15 financial year without exceeding their non-concessional contributions cap amount for the year. | Detailed Reasoning - Excess non-concessional contributions: In accordance with section 292-85 of the Income Tax Assessment Act 1997 (ITAA 1997), a person has excess non-concessional contributions for a financial year if the amount of the person's non-concessional contributions for the year exceeds the person's non-concessional contributions cap for the year. Relevantly, subsection 292-85(2) of the ITAA 1997 states that for the 2009-10 or a later financial year, a person's non-concessional contributions cap for the year is an amount equal to six times the person's concessional contributions cap for the year. Concessional contributions cap is defined in subsection 291-20(2) of the ITAA 1997. For the 2013-14 financial year, the cap is set at $25,000. In accordance with section 960-285 of the ITAA 1997, for 2014-15 or a later financial year, the cap amount is indexed annually in line with average weekly ordinary time earnings, in increments of $5,000 (rounded down). Financial year is defined in subsection 995-1(1) of the ITAA 1997 as a period of 12 months beginning on 1 July. Based on the above, the concessional contributions cap for the financial year beginning 1 July 2014 is $30,000 (indexed). Consequently, the non-concessional contributions cap for the year is $180,000. However, in accordance with subsections 292-85(3) and (4) of the ITAA 1997, if a person's non-concessional contributions for the first year exceed the annual non-concessional contributions cap amount for the year; and the person is under 65 years at any time in the first year, the non-concessional contributions cap for the first year is increased to three times the annual non-concessional contributions cap amount. That is, the person can 'bring forward' two years' worth of non-concessional contributions. The bring-forward is triggered automatically when contributions in excess of the annual non-concessional contributions cap amount are made in a financial year. However, according to subsection 292-85(3) of the ITAA 1997, this is on the condition that a bring-forward has not been trigged in the preceding two financial years. The 'bring forward' provisions can be activated every three years. However, where a bring forward has been triggered, the two future years' entitlements are not indexed. | Detailed Reasoning - Application of section 292-85 to this case: If the Taxpayer does not exceed their non-concessional contributions cap for the 2012-13 financial year, the Taxpayer will not trigger bring- forward provisions. Consequently, the Taxpayer's non-concessional contributions cap for the 2014-15 financial year would be $180,000. However, on 1 July 2014 (the beginning of the 2014-15 financial year) the Taxpayer will be less than 65 years of age. Therefore, if at any time during the 2014-15 financial year the Taxpayer makes non-concessional contributions in excess of the non-concessional cap amount for the year, the Taxpayer will trigger the bring-forward provisions and the Taxpayer's non-concessional contributions cap amount in that (first) year will be $540,000. It follows that the Taxpayer can make non-concessional contributions of up to $540,000 in the 2014-15 financial year without exceeding their non-concessional contributions cap amount for the year | Detailed Reasoning - Other relevant comments: Please note that in accordance with subsection 292-90(1) of the ITAA 1997, the amount of your non-concessional contributions for a financial year includes an amount of your excess concessional contributions (if any) for the year.

Relevant facts and circumstance: The Taxpayer is a member of a complying superannuation fund (the Fund). | The Taxpayer proposes to make non-concessional contributions of $X to the Fund during the 2014-15 financial year, prior to the Taxpayer turning 65 years of age. | On the 1 July 2014, the Taxpayer will be less than 65 years. | In the 2013-14 financial year, the Taxpayer made a non-concessional contribution of $Y. | The Taxpayer did not make any concessional or non-concessional contributions to the Fund in the 2011-12 and 2012-13 financial years. | The Taxpayer is not employed and they have no intention of re-entering the workforce.