Sean Johnston, client relationship manager for Heffron, said contributions can be made at any time, but the first point of call regarding deciding if a member can make any contribution is to test their cap space to ensure it is possible.
Unlike concessional contributions, non-concessional contributions don’t create any special tax treatment for the contributor as they receive no tax concessions on the way into a fund, and the fund doesn’t have to pay any tax on them when it receives them.
There are several common types of non-concessional contributions including personal contributions made from a member’s own money for which they do not claim a tax deduction, contributions made for a spouse or a child under 18 years, and amounts transferred from a foreign super fund that do not count towards an Australian fund’s assessable income.
In a recent SMSF clinic, Johnston gave an example of a client, aged 67, who wanted to make one last contribution to his fund before moving into the pension phase.
“The client wants to make a contribution in early July 2024 before starting the pension phase in August 2024, and wishes to make a $110,000 non-concessional contribution using all of his 2024 cap,” he said.
“Let’s assume this client has the cap space to do so and for this year the cap is $1.68 million. Don’t forget that next year’s contribution caps will increase from $110,000 to $120,000 per year.”
He said another strategy is for the client to trigger a bring-forward contribution, and if they are below the TSB, they may be able to contribute $360,000 of non-concessional contributions next year, presuming they are not in the bring-forward period and are not above their cap.
SMSF members with total super balances under $1.68 million at 30 June can bring forward up to two additional years’ non-concessional contributions, while those with a TSB under $1.79 million at 30 June can bring forward one year’s additional non-concessional contributions.
There are certain circumstances under which members can contribute more than these amounts such as special limits which may apply if there is a sale of a small business or compensation payment for an injury, both of which have particular conditions that must first be met.
In the example, Johnston said the fact that the client wants to start their pension phase in August 2024 is not a concern if they wish to make a contribution in July, under whatever category they may choose.
“The only thing that I would suggest is that if you have a concessional contribution or personal concessional contribution, you need to do your section 291 notices before that pension is commenced,” he said.
