Explanatory Memorandum
(Circulated by authority of the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator the Hon. Jane Hume)Chapter 1 - Bring forward non-concessional contributions cap
Outline of chapter
1.1 The amendments to the ITAA 1997 in the Bill enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring forward rule.
Context of amendments
1.2 In the 2019-20 Budget, the Australian Government announced that Australians over 65 would have greater flexibility in making voluntary superannuation contributions (concessional and non-concessional) from 1 July 2020.
1.3 This initiative is implemented through three changes:
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- the age at which the work test starts to apply for voluntary concessional and non-concessional superannuation contributions is increased from 65 to 67;
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- the cut-off age for spouse contributions is increased from 70 to 75; and
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- enabling individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring forward rule.
1.4 The Bill amends the ITAA 1997 to implement the changes to the bring forward rule.
1.5 The Superannuation Legislation Amendment (2020 Measures No. 1) Regulations 2020 will amend the SIS Regulations and RSA Regulations to implement the increases in the age at which the work test applies and the cut-off age for spouse contributions.
Summary of new law
1.6 Individuals aged under 67 can make up to three years of non-concessional superannuation contributions under the bring forward rule.
1.7 This change becomes law on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Act receives the Royal Assent. Once law, it applies to non-concessional contributions made on or after 1 July 2020.
Comparison of key features of new law and current law
| New law | Current law |
| Individuals under 67 years of age may access the bring forward non-concessional contributions cap in a particular financial year. | Individuals under 65 years of age may access the bring forward non-concessional contributions cap in a particular financial year (paragraph 292-85(3)(c) of the ITAA 1997). |
Detailed explanation of new law
1.8 The annual non-concessional contributions cap is currently set at $100,000 per year. This cap limits the amount of contributions that can be made each financial year (refer subsection 292-85(2) of the ITAA 1997).
1.9 Individuals may be able to "bring forward" an amount of their annual non-concessional contributions cap equal to two or three times the annual cap, that is, up to $300,000, as long as they meet the eligibility criteria in subsection 292-85(3) of the ITAA 1997.
1.10 Currently, paragraph 292-85(3)(c) provides that only an individual under 65 years of age in the financial year in which they make the contribution may access the bring forward non-concessional contributions cap.
1.11 The Bill amends paragraph 292-85(3)(c) so that the cut-off age for accessing the bring forward non-concessional contributions cap is increased from 65 to 67 years. [Schedule 1, item 1, paragraph 292-85(3)(c) of the ITAA 1997]
1.12 This means that individuals aged 65 and 66 who were not previously able to access the bring forward non-concessional contributions cap due to their age may do so, starting in the 2020-21 financial year. [Schedule 1, item 2]
Application and transitional provisions
1.13 This change becomes law on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Act receives the Royal Assent. Once law, it applies to non-concessional contributions made on or after 1 July 2020. [Schedule 1, item 2]