A technical specialist has highlighted the difficulties faced by people turning 75 towards the end of the financial year in making additional superannuation contributions , noting their strategies may have to be brought forward.
BT technical consultant Tim Howard acknowledged when someone turned 75 they had until the 28th day of the following month to make any further member contributions before being unable to do so again at any point in the future, but this timeframe could be truncated by rules in the Income Tax Assessment Act 1997.
“If a member turns 75 on 20 June – so right at the end of the financial year – can they make a $120,000 non-concessional contribution (NCC) and then use the bring-forward rules in July and make a $360,000 NCC in the following financial year?” Howard asked during an adviser briefing yesterday.
“The issue is to trigger the bring forward and make a voluntary member contribution, you need to be less than 75 on 1 July.
“That is a requirement of the tax act and separate to the superannuation regulations where we’re talking about contribution acceptance.
“In that example, you couldn’t trigger the bring forward in July, but can trigger it in the current financial year and contribute what was remaining [under the NCC cap].
“There is some interaction between two sets of rules and a pretty good question to consider if you have a client turning 75 right at the end of the financial year.”
He noted this unusual difficulty only existed for those whose 75th birthday was close to the end of the financial year, with a further anomaly existing for someone who turns 75 on 2 July.
“The age-based conditions for triggering the bring forward are that you need to be under 75 at any time in the financial year, which means aged 74 or less on 1 July, to be eligible to trigger the bring forward in any particular year,” he added.
“So if I’m 74 on 1 July but turn 75 on 2 July, I have until 28 August to make a voluntary contribution to super and am still eligible to make a bring-forward contribution on the age basis.
“So as long as my total super balance is below the required threshold and my contribution history shows I am not under a previous bring-forward window, I could still make that $360,000 NCC by the 28th day of the following month.”
