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Is It Too Late to Boost Your Superannuation Contribution?

All soon-to-be retirees only want to have the best retirement life possible. And that is only feasible if they can boost their superannuation’s super balance. Now, only two things will allow you to achieve that: if you can save up or earn a significant amount and deposit it to your superannuation account. However, the latter is only possible if you have enough lead time before your actual retirement.


As you may already know, there is a contribution cap for superannuation. That means you cannot just deposit any amount of money after the limit set for them. But do not lose hope. If you only have a year to increase your super balance, there is a way to do so, and that is through applying the bring-forward rule.


All About the Bring-Forward Rule


The bring-forward rule is an arrangement that allows you to make extra non-concessional contributions without the need to pay additional tax fees. It is possible by making use of the future year caps. In simple words, you are using the caps you have for next year during the current financial year.


Keep in mind that this rule only applies to non-concessional contributions, which are the contributions made from your after-tax income. These are separate contributions that are not taxed in your super fund. You can maximise the latest non-concessional contribution cap of $110,000 as of July 1, 2021.


If you combine it with the annual contribution cap you have for your taxed contribution, you can deposit a maximum of $330,000 to your superannuation without any additional tax liabilities.


Superannuation Advice: Important Notes to Remember


Here are some notes to keep in mind:


  • The bring-forward rule’s specifics will change depending on the total amount you have in your super by the end of the last financial year. When what you have is already near the general balance cap of $1.7 million, expect contribution limitations in the process.


  • Here are some guidelines to consider according to the ATO:

    • If your previous financial year balance is less than $1.48 million, you are allowed to contribute three times the annual non-concessional contributions cap over three years.

    • If your previous financial year balance is above $1.48 million but less than $1.59 million, you are allowed to contribute two times the annual cap over two years.

    • If your super balance of the previous financial year is $1.59 million and higher, you could exceed the set limit, so the bring-forward rule no longer applies to you.


  • If you meet the eligibility requirements and have no problem with your super balance, the bring-forward rule will apply as is. It will allow you to max up a contribution of $330,000 over the subsequent financial years.


How to Know If You Are Eligible


Aside from the limitation guidelines stated above, age is another factor that determines your eligibility to use the bring-forward rule. Here is the general rule ATO mentioned regarding age qualification:


  • Account-holders aged 67 and below can make non-concessional contributions of up to three times the annual non-concessional contribution cap for that financial year.

  • Account-holders aged 67 and above can no longer access their bring-forward ability. You have to meet certain conditions for the ATO to accept your additional contributions.


Conclusion


If you are at the right age and have just enough contributions in your super fund, you can utilise the booster rule called the bring-forward arrangement. It is an excellent opportunity for account holders who want to maximise what they can get during their retirement, especially when they finally get the money for contributions.


If you need more clarification or superannuation advice, feel free to reach out to us at Swell Financial Planning. We provide tailor-fit financial solutions to help our clients reach their financial dreams. We also offer financial health checks to help you determine your current financial position. Contact our experts today!


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