Advisers should be cautious when dealing with clients looking to use a non-concessional contribution (NCC) bring-forward strategy by checking they have not already started one or that their total superannuation balance (TSB) allows them to use it.
MLC senior technical advice consultant Mark Gleeson said it was important to map out the order of NCCs for clients in relationship to their TSB, which included checking if there was an existing bring-forward period, as a failure to do so could come back onto the adviser.
“We’ve had some cases that go to the Financial Services and Credit Panel where advisers have been rapped over the knuckles and got in trouble not just for NCC issues, but a range of other issues, but also for not checking if there’s an existing bring-forward period,” Gleeson said in reference to a case heard before the panel on 10 April.
In that case, an adviser recommended in June 2022 a client make an NCC of $110,000 for 2021/22 and an NCC of $301,618 for 2022/23 without taking into account they were in the second year of a three-year bring-forward arrangement and the available balance was less than $125.
“We tend to assume clients are not in the bring-forward period, but on some of these cases they actually have been and the adviser didn’t do proper due diligence and there were excess issues,” Gleeson said.
He said while checking if there is an existing bring-forward strategy in place, advisers should note when it started and what previous caps may still apply to an NCC.
“The bring forward might have been triggered last financial year or the year before and the trick here is that if the cap was triggered in either of those two financial years, we don’t have the $360,000 cap available. It’s set at $330,000,” he noted.
“Watch out for the two-year cap as well. With the change in TSB thresholds it could be that if you’ve triggered a two-year bring-forward, the cap is not $240,000, it is $220,000.”
