The 3-year bring-forward rule allows Members in an SMSF to contribute more than the Non-Concessional Contribution (after-tax Contributions) cap of $110,000 during a 3-year financial period from 1 July 2021. From 1 July 2017 to 30 June 2021, the non-concessional contributions cap was $100,000.
For more clarification, please see the example below:
Sam, who is 40, decides to make a Non-Concessional Contribution of $220,000 into his Super Fund in the 2019 financial year. Although this exceeds the annual Non-Concessional Cap of $110,000, he is able to make the contributions to his Super Fund without having to pay the excess contributions tax. This is because the total cap of the next 2 financial years (2020 and 2021) has been brought forward to 2022. Therefore, the amount that Sam contributed stays within the total Non-Concessional Cap of $330,000 ($110,000 x 3).
However, not the full amount of the 3-year bring-forward Non-Concessional Contribution cap needs to be utilised once triggered.
By bringing forward the caps of the next 2 years, members can make up to 3 years’ worth of non-concessional contributions in the First Year. Previously, this rule was only applicable to those under the age of 65 or 67. However, from 1 July 2022, this rule will now apply to those under the age of 75.
Bring-Forward Provision for People Under 75
If you are under 75 years old and you make excess non-contributions, the bring-forward rule will automatically be triggered and bring forward the next two years’ non-concessional contributions – but certain conditions apply. You can make a total of $330,000 over a three-year period as your non-concessional contributions if the bring-forward rule is triggered.
For Members with high total super balance at 30 June (i.e $1.68 million), the cap for non-concessional contribution will reduce. See more info here.
If you exceed your non-concessional contribution, the ATO will issue a letter to the Trustee and you may need to pay extra tax.
Bring-forward rule for individuals who are turning 75
From 1 July 2022, the bring-forward rule cannot be applied on Members who are aged 75 or over. The maximum amount of non-concessional contribution for an individual aged 75 or over is $110,000 per annum. In addition, the work test must be met by the Member in order to make contributions to your SMSF. If the non-concessional cap is exceeded, Members may withdraw the excess amount from the Fund, otherwise the excess amount may be taxed at the marginal tax rate.