Treasury has confirmed the start date for new legislation making 65 and 66 year olds eligible to use the non-concessional contributions (NCC) bring-forward provisions.
The department informed the SMSF Association a day after the legislation received royal assent the measure does apply to the current financial year, that is, from 1 July 2020 onwards as first intended.
According to SuperGuardian education manager Tim Miller, it means any person who was 65 or 66 years of age on 1 July 2020 has access to these bring-forward provisions.
The SMSF Association provided further clarification as to the compliance implications of the now-established implementation date of the measure.
“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 (total super balance) and assuming no other NCC contributions have been made in 2020/21),” the association noted.
The delay in passing the bill had caused great angst throughout the sector with regard to its commencement date due to some details of the bill that potentially were in conflict with the nominated 1 July 2020 intended execution.
“It had always been discussed, and accepted by all, that the changes to the law will be applicable from 1 July 2020. This is based on the drafting of the bill stating an application date of 1 July 2020 in schedule 1, paragraph 2,” SuperConcepts SMSF technical specialist Anthony Cullen said.
“There is a nuance in the bill, however, that also states at paragraph 2 (Commencement), that commencement is ‘the first 1 January, 1 April, 1 July or 1 October to occur after the day the act receives royal assent’. Given royal assent has only just occurred, this would mean 1 July 2021.”
According to Cullen, regardless of when the measure commenced, SMSF members still have a decision to make as to when they choose to use it.
“It is worth considering whether triggering the bring-forward rule should occur this financial year or next (or even later). Triggering the bring-forward rule this year will lock a member into the thresholds and caps as they currently are. Subject to their total super balance, this could potentially be up to three years of contributions equalling $300,000. Whereas, next financial year, this could be as much as $330,000,” he said.
“Before deciding, you will need to have a reasonable idea as to what your TSB will be as at 30 June 2021. The last thing you want to do is hold out, only to find you have exceeded a threshold that limits your ability to make further contributions.”
This piece of legislation had been causing uncertainty over contribution strategies for individuals in this age bracket.