As you approach retirement, it’s wise to consider putting extra money to boost your Super this 2023 with the bring-forward rule. If you happen to receive an inheritance or sell an asset, the same applies.
By doing so, not only will you give your retirement savings a boost, but you’ll also benefit from tax-free income when you withdraw from your super during retirement. Contributing a large amount of after-tax money into your super in a single year can be challenging due to contribution caps or limits. One solution is to use a bring-forward arrangement.
What has changed?
The Australian government recently announced changes to the superannuation rules that will provide greater flexibility for Self-Managed Super Funds (SMSFs) and their members. The age limit for contributing non-concessional (after-tax) contributions under the bring-forward arrangement has been increased from 65 to 75. This change offers an excellent opportunity for SMSF members to boost their retirement savings and take advantage of the transition into a new stage of their life.
What is a bring-forward arrangement?
The bring-forward arrangement allows an individual to make up to three years’ worth of non-concessional contributions in one tax year. Previously, the age limit for this arrangement was 65. However, the government has increased the age limit to 75, effective from 1 July 2022. This change provides more flexibility for people who want to contribute to their SMSF and save for their retirement beyond the traditional retirement age.
Are you eligible?
Individuals aged 67 to 74 will be eligible to access the bring-forward arrangement if they satisfy the relevant work test. The government has also proposed to remove the work test for individuals aged 67 to 74 who make non-concessional contributions of up to $330,000 over three years.
ATO has several case studies to help you understand how this works and how it affects the SMSF member
What are the advantages of an extended age limit for the bring-forward arrangement?
- The extended age limit for the bring-forward arrangement and the proposed changes to the work test will provide SMSF members with more flexibility to boost their retirement savings. Individuals who are approaching retirement age or who have already retired can continue to contribute to their superannuation fund and take advantage of tax concessions to maximise their savings.
- This allows SMSFs to make additional non-concessional contributions on behalf of their members, particularly those who are unable to make contributions themselves. SMSF members who have reached their personal contribution caps in the current year can also use the bring-forward arrangement to make additional contributions over the next two years, up to the new age limit of 75.
These changes in the bring-forward rule align with the government’s broader objective of encouraging retirement savings and ensuring Australians are financially secure in their post-work life. They also provide greater flexibility for SMSF members and their funds to prepare for a smooth transition into a new stage of their life.
How can you view the bring-forward arrangement?
If you contribute above the amount for non-concessional contributions in a given year, the Australian Taxation Office (ATO) may provide you with the option to access the caps for upcoming years without needing to meet any additional eligibility criteria.
Verify if you have triggered the bring-forward arrangement by reviewing your online ATO services account:
- Log in to your account
- Select the Super option
- Navigate to the Bring-forward arrangement section
It’s worth noting that the most recent information may not always be immediately accessible on ATO online services because of fund reporting timelines, particularly in the case of self-managed super funds (SMSFs). In such situations, contacting your super fund can provide you with the most up-to-date information.
Key Points
- Previously, the age limit for the bring-forward arrangements was 65. However, the government has increased the age limit to 75, effective from 1 July 2022.
- Bring-forward arrangements involve utilising non-concessional contributions that are funded through your after-tax income or savings. These contributions are exempt from taxation upon entering your super fund, but any investment earnings associated with them are subject to a 15% tax.
- The calculation of your overall super balance is based on the end-of-year figure from 30 June of the preceding financial year in which you initiated the contributions that triggered the bring-forward arrangement.
Conclusion
The changes to the age limit for the bring-forward arrangement for non-concessional contributions provide greater flexibility for SMSF members to boost their retirement savings. With the new age limit of 75, individuals in their late 60s and early 70s can continue to contribute to their SMSF and take advantage of numerous tax benefits.
SMSF members and their funds can now prepare for a smooth transition into a new stage of life, knowing the bring-forward rule supporting self-funded retirement is designed to provide flexibility while maintaining control.
Make sure to check your ATO online services account and review the Bring-forward arrangement section if you’re thinking about making a substantial contribution to your super fund. Our SMSF team at Wardle Partners Accountants & Advisors can assist you with the process and help you stay informed about your contribution caps. Contact us today to ensure you don’t exceed the limits and miss out on valuable tax benefits.
