Bring-Forward Rule

The Bring-Forward Rule

Have you ever wondered how to contribute large amounts of savings into Super?

Preparing for retirement can be a challenging time and one of those challenges is maximising superannuation balances and getting more money into your super account up until retirement.

One way of achieving this goal is by using the bring-forward rule.

What is the Bring-Forward Rule?

The bring forward rule quite simply refers to non-concessional contributions which are advanced contributions from a three-year period which are contributed in a shorter time frame.

Since 1 July 2017, the annual non-concessional (after tax) contributions cap is $100,000. The bring-forward rules allow you (if you meet all the eligibility criteria), to make non-concessional contributions of up to three times the annual contributions cap in a single year (3 x $100,000 = $300,000 in 2018/2019 or 2019/2020).

This may help you maximise your superannuation balance into retirement.

What do I need to know?

  • Non-concessional contributions are made into your super account from your after-tax income. These contributions are not taxed in your super fund, but the associated investment earnings are taxed at 15%.
  • To make any non-concessional contributions at all, your total superannuation balance must be less than $1.6 million on 30 June of the previous financial year to the one in which you want to make the contribution.
  • If you want to start making a bring-forward contribution in a particular financial year, you must not have already triggered a bring-forward arrangement in the previous two years.
  • If you are aged under 65, you can make non-concessional contributions up to the annual cap ($100,000 in 2018/2019 or 2019/2020) and use the bring-forward rules. You are not required to be working.
  • If you are aged 65 to 74, you can make non-concessional contributions up to the annual contributions cap only if you meet the requirements of the work test (be ‘gainfully employed’ for at least 40 hours in 30 consecutive days during the same financial year in which the contribution is made). You cannot, however, use the bring-forward rules unless you were 64 for some part of the financial year in which you trigger a bring-forward arrangement
  • If you are aged 75 and over, you are generally not permitted to make a non-concessional contribution and so you cannot use the bring-forward rules.

How does a Bring-Forward Arrangement work?

Michael is aged 50 and his total superannuation balance is currently $320,000, but he would like to boost his retirement savings in the years before his planned retirement at 65.

Michael decides to sell an investment property he owns and make a non-concessional contribution into his super account of $300,000 from the proceeds of the sale in August 2018.

As Michael has exceeded his normal annual non-concessional contributions cap of $100,000, he automatically triggers the bring-forward rules by making this large contribution. As he has triggered a bring-forward arrangement, Michael can make no further non-concessional contribution in 2019/2020 or 2020/2021 if he wishes to use up his full $300,000 three-year cap.

In 2021/2022, Michael’s non-concessional contributions cap will reset, and he can make further non-concessional contributions up to the normal annual contributions cap.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.