The Treasury has confirmed how the new bring-forward rules will apply for people aged 65 and 66 on or after 1 July 2020.
Last week, the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 passed through Parliament and achieved royal assent. The bring-forward measures will amend the Income Tax Assessment Act 1997 to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.
In a recent update, the SMSF Association said it received confirmation from the Treasury that the More Flexible Super Bill extends the bring-forward arrangements to people aged 65 and 66 for non-concessional contributions (NCC) made on or after 1 July 2020.
“In this regard, an individual aged 66 who makes a $300,000 NCC today under the bring-forward rule would not breach the NCC cap (subject to their TSB and assuming no other NCC contributions have been made in 2020–21),” the SMSF Association said in a LinkedIn update.
“We were pleased to provide this update to SMSF Association members yesterday afternoon, a prompt response based upon member queries about when this measure will commence.”
A recent technical update by Colonial First State also noted that for most clients, there is no urgency to make additional non-concessional contributions before the end of 2020–21, as they can make additional non-concessional contributions in future years.
However, there are some situations, such as when the client turns 67 in 2020–21, when it may be advantageous to make additional contributions prior to the end of 2020–21, as it is the last year they can trigger the bring-forward rule.
Previously, members under age 65 at any time in a financial year may effectively bring forward up to two years’ worth of non-concessional cap for that income year, allowing them to contribute a greater amount up to $300,000 without exceeding their non-concessional cap.
Under the new rules, members can trigger a bring-forward period from 2020–21 onwards if they are under age 67 (previously age 65) on 1 July at the start of the relevant financial year.
These changes also complement previous actions by the government to improve flexibility of the retirement system that allowed people aged 65 and 66 to make contributions without meeting the work test.
Source: SMSF Adviser