65 year olds can still trigger the bring forward rule
If a member was 64 on 1 July 2019 and has turned or is turning 65 during 2019-20, they can still trigger the bring-forward rule, provided:
• the member is not already in a bring forward period, and
• the work test or work test exemption is satisfied if the member has already turned 65 at the time of making the contribution,
and
• the member’s total super balance on 30 June 2019 was:
• below $1.4 million to trigger the three-year bring-forward NCC cap, or
• below $1.5 million to trigger the two-year bring-forward NCC cap.
Whether triggering the bring-forward rule for such a client in 2019-20 is the most optimal strategy for maximising NCCs will depend on whether pending proposals become law on 1 July 2020. See ‘Proposed Changes’ below for more information.
Unused bring forward amounts can still be used when 65+
A member who is over the age of 65 may also use any remaining bring forward cap in 2019-20, even if this is more than $100,000, provided they:
• are still within a bring-forward period in 2019-20, and
• have a TSB of less than $1.6m on 30 June 2019, and
• have satisfied the work test or work test exemption in 2019-20.
Work test
For 2019-20, the work test must be satisfied if the member is age 65 or over at the time of making the contribution, unless the member qualifies for the work test exemption.
From 2020-21 onwards, the Government has proposed increasing the age at which the work test (or work test exemption) must be satisfied from 65 to 67. At the time of writing this proposal has not been legislated.
Proposed changes
From 2020-21 onwards, the Government has proposed allowing access to the bring forward rule to eligible members under age 67 at any time during the financial year. In addition, it is proposed that the age at which the work test starts to apply for voluntary concessional and non-concessional superannuation contributions will increase from 65 to 67.
However, at the time of writing only a Bill* to implement this change to the bring forward rule has been introduced to Parliament. Parliament is scheduled to sit from 10 – 18 June, meaning this proposal may be made law before the end of the financial year.
This uncertainty causes some planning challenges between now and the end of the financial year, particularly for members who reach age 65 during 2019–20 and wish to maximise non-concessional contributions by triggering their final three-year bring forward period at the optimal time.
The problem for these members is whether to trigger their final bring forward period in the 2019-20 financial year (in line with current legislation), or to wait to trigger their final bring forward period in the financial year that they reach age 67 (2021–22), in line with the proposed legislative change. Note that these options are mutually exclusive in the case of a three-year bring forward period.
* Treasury Laws Amendment (More Flexible Superannuation) Bill 2020
SMSF can seem complex. We have a special offer for general advice for $225.00.
Please click here for more information.
For more information on this subject feel free to get in touch with us click here
To receive free updates on relevant information click here
To read more about our specialised service offers for SMSF please click here