SMSF trustees need to be aware of the change in the operation of the non-concessional cap bring-forward rule to ensure they are certain about the level of superannuation contributions they can make, an industry solicitor has said.
Townsends Lawyers solicitor Julie Hartley said: “To be eligible to make bring-forward contributions you have to look at the difference between the general balance transfer cap [of $1.6 million] and the member’s total superannuation balance.
“And the difference between these two amounts will determine what they can contribute under the bring-forward [provision].”
Hartley pointed out the application of that eligibility criteria included the additional hurdle of having to assess an individual’s situation on a yearly basis.
“[The bring-forward rule] is not the same as now where once you were eligible [to use] the bring-forward rule in the first year you could continue to [automatically] contribute for the next two years,” she noted.
“Here you have to meet new requirements every year.”
An example Hartley used to illustrate the point was one where an individual’s super balance was below the $1.6 million threshold in year one, allowing them to trigger the bring-forward rule at the time, but where circumstances had changed during the following year.
In the scenario the client in question made some prudent investment choices that led to their balance exceeding the $1.6 million limit in year two, meaning no non-concessional contributions could be made.
But in year three market returns fell, returning the member’s balance to below the $1.6 million watermark. This would mean the individual would once again be able to make further non-concessional contributions in the year without exceeding either the $300,000 or the general balance transfer cap.