ATO assistant commissioner Alex Affleck said it is important for SMSF practitioners and trustees to realise that even if the bring-forward rule has already been triggered, the total super balance still needs to be tested for each year.
“When you work out what your non-concessional contributions cap for a financial year is, you need to test what your total super balance was immediately prior to the financial year you’re currently in,” explained Mr Affleck.
The total super balance, he said, will dictate what a member’s non-concessional contribution cap is for the financial year and whether they’re actually able to access the bring-forward rule.
“For example, if you had between $1.4 million and $1.6 million, your non-concessional contribution cap would be $200,000, and you’d have a bring-forward of two years,” he said.
“So you make a non-concessional contribution of $150,000 which triggers the rule. You then have $50,000 remaining for the next financial year. [However], if your total super balance immediately prior to that second year is equal to or above $1.6 million, then your non-concessional contribution cap is nil for that second year.”
Mr Affleck said there are transitional rules where a member has triggered the three-year bring-forward rule in either the 2015-16 year or the 2016-17 year and as part of that three-year bring-forward rule, they make non-concessional contributions after 1 July 2017.
“This is an area where we have some concerns in terms of whether this transitional rule will trip people up. We’re hoping that it won’t, but there is some risk here,” he said.
“It’s not an easy concept for people to get their heads around and it is something where we see a bit of risk in terms of people getting this wrong.”
Mr Affleck said there had been a number of cases of individuals getting the three-year bring-forward rule wrong, which has had “serious consequences for them”.
“We do see this as a bit of an issue, so I’d just like to stress that point,” he said.