Non concessional contributions are those personal contributions that are deposited into your SMSF’s bank account which have been taken from your after tax income; i.e. you are not claiming a tax deduction for them. Rather than coming from your employer, these contributions are coming from your own personal bank account.
Anyone under age 65 can make non concessional contributions. You do not need to pass a Work Test if you are below 65 at the time of application.
Maximum Non Concessional Contributions
There is a yearly limit of $150,000 for non concessional contributions made into your Super.
The 3 Year Bring Forward Rule
The “3 Year Bring Forward Rule” allows a member to deposit up to three years’ worth of non concessional contributions without exceeding the limit. You automatically qualify for the “3 Year Bring Forward Rule” if you are under the age of 65 at any time during the financial year and you exceed the $150,000 maximum non concessional contribution amount.
In the year you exceed $150,000 of non concessional contributions, you should not exceed $450,000 of non concessional contributions in that financial year or over the following two financial years. Once the three financial years has passed since the “3 Year Bring Forward Rule” commenced, you have the freedom to contribute up to $450,000 of non concessional contributions again.
Non Concessional Contributions and Taxes
Non Concessional Contributions are not subject to contributions tax and no tax is applied when a member withdraws this money from superannuation during retirement.
Exceeding the Non Concessional Contribution Limits
In cases where members have contributed more than non concessional limit in one contribution, the SMSF must return the amount within 30 days. However, non concessional contributions tend to be below the limit and are therefore when the total non concessional contributions have exceeded the during a financial year, these “excess” contributions are subject to Excess Contributions Tax.
Excess Contributions Tax is levied at 46.50% of excess non concessional contributions and will be charged for excess amounts on the Non Concessional Contributions. Excess Contributions Tax can be up to 93% so it is vital to make sure that the non-concessional contributions to your SMSF are properly checked and tracked.