Retirement
Bring-forward contributions
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The ability to bring-forward future year entitlements to make non-concessional contributions to superannuation has been in place for many years now. Up until 30 June 2020 this could be done by anyone who was under age 65 on 1 July and met the total superannuation balance test and, in certain circumstances, the work test.

Legislation has now been introduced to increase the age from 65 to 67 years of age, effective from 1 July 2020. At the time of writing [late October] the legislation was before the Senate.

The idea of the bring-forward provisions is to allow individuals who have the capacity to make large contributions the opportunity to do so as a single lump sum rather than to spread the amount out over a number of years in line with the existing annual caps. As with anything, there are trade-offs.

It is effective for individuals who are approaching retirement who may want to make a larger one-off contribution. It may be due to receiving an inheritance, selling a home or selling a large asset such as their business, to name just a few reasons why an individual might have the capacity to contribute large amounts.

Of course superannuation and tax laws provide for other opportunities, such as downsizer and capital gains tax (CGT) concessional contributions that can enable extra funds to be put into superannuation. These opportunities also come with many conditions and, as such, the bring-forward arrangements can be an easier option to use in a broad range of circumstances.

Increasing the bring-forward age to 67, in alignment with the contribution work test requirements, will provide numerous strategic opportunities, particularly as preserved benefits are still accessible from age 65.

What are the bring-forward provisions?

Effectively an individual can bring-forward their non-concessional contributions cap from future years and use them earlier. The maximum amount that can be contributed is three (3) times the annual non-concessional contributions cap, either as a one-off contribution or as multiple contributions over the allowable bring-forward period, the trigger being that a single contribution exceeds the standard non-concessional cap.

The provisions are only triggered if an individual exceeds the non-concessional contributions cap and is eligible to bring-forward subject to their total superannuation balance. Excess non-concessional contributions that are otherwise ineligible to trigger the bring-forward amounts are treated as excess contributions and will be subject to tax on associated earnings and a refund of the excess via the Australian Tax Office (ATO). 

One of the trade-offs of the bring-forward provisions are that by bringing forward future years an individual forgoes any indexation to the non-concessional cap that may otherwise apply in those years. That is a relevant discussion point as the industry approaches the first period of cap indexation.

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