Financial advisers dealing with low-income super fund members who can use the three-year bring-forward non-concessional contribution (NCC) amount should consider what other contributions could be made concurrently rather than allocating the full bring-forward amount at the first instance.
MLC senior technical advice consultant Scott Quinn said advisers should be cautious about using the $360,000 NCC cap that may be available to a client looking to boost their super balance, given they could use some of that money to benefit from the spouse contribution and government co-contribution rules.
“If, as a low-income earner, I am eligible for the government co-contribution and I want to max out my NCCs using the bring-forward rules, but want to be eligible for the government co-contribution next year and the year after, I need to leave space for those co-contributions,” Quinn said during a briefing to advisers yesterday.
“So I need to leave space for that extra $1000 in the 2025/26 and 2026/27 years and what I can do is contribute $358,000 this financial year and that will qualify me for the government co-contribution this year, and because I have left room under the cap, I will be eligible for it for the next two years.”
He said a similar strategy could be used with a spouse contribution where the bring-forward NCC would be $351,000 this year as $3000 for the spouse contribution would be set aside for the current and next two financial years.
“If I was eligible for both, I could do a personal contribution of $349,000, which leaves $11,000 in room [below the $360,000 cap] for the $1000 each financial year to pick up the co-contribution and the $3000 each year each to pick up the spouse contribution, and the $540 tax offset for my partner,” he said.
“You can’t just jump the gun and throw in $360,000. You’ve got to look at the scenario and what the client is eligible for.
“If they are eligible for any of these, leave some space because if you use the $360,000, you’re going to miss out on the government co-contribution and the spouse contribution tax offset in the second and third year.”
