Among the many things an adviser should check when seeking to advise a client making a non-concessional contribution (NCC) using the bring-forward cap is whether or not they have made a government co-contribution, a technical specialist has pointed out.
MLC Australia senior technical services manager Jennifer Brookhouse said while it is well understood a government co-contribution does not count towards the NCC cap, what is not as well known is the contribution made to attract that government co-contribution does.
Speaking during a recent webinar, Brookhouse used the hypothetical case of Gus, aged 61, who received advice in October 2022 to make a $110,000 NCC, which was equal to the annual cap at the time, to illustrate how this might occur.
After the contribution was made in the 2023 financial year, Gus subsequently received advice to make a bring-forward $360,000 NCC via a withdrawal from his wife’s account to his. His total superannuation balance as at 30 June 2024 was $800,000 and well within the cap.
However, every year he makes a $1000 non-concessional contribution to get the co-contribution.
“What Gus did not understand is that non-concessional contribution also included that amount that he had to make that extra $1000 to get the co-contribution. If we think back to his scenario in that first year where he put in $110,000, he actually put in $111,000 and actually triggered the bring-forward rule back then,” Brookhouse said, adding that if he made the $360,000 contribution in 2024/25 he would receive an excess notice from the ATO.
She noted it was vitally important to take a moment to look at other potential contributions a client may have made that they have forgotten about.
“The ATO website in the client’s myGov account can actually do this. If you’re looking at this you get a screen with fund details, and it will list superannuation funds, and you click on that fund [and] it will take you to the contributions being made to that fund,” she said.
Other easy-to-forget contributions that will count towards the cap include small contributions a client may make to a secondary fund to retain insurance cover.
“The ATO’s myGov is not necessarily 100 per cent accurate. It can lead to errors. So it’s also overlaying it with other things that you may know or superannuation fund statements and things like that,” Brookhouse said.
