As retirement approaches, putting extra funds into your superannuation can be a wise decision. This is especially true if you come into extra money through an inheritance or the sale of a significant asset. Increasing your super contributions not only enhances your retirement savings but also offers the benefit of tax-free income when you start withdrawing from your super during retirement.

Recent changes, such as the removal of the work test and adjustments to the upper age limit for making contributions, now allow many older Australians to take advantage of these opportunities. However, navigating contribution caps can pose a challenge when attempting to inject a substantial sum of after-tax money into your super in a single year. One effective strategy is to utilise a bring-forward arrangement.

What is a bring-forward arrangement?

A bring-forward arrangement allows you to bring forward your non-concessional contribution caps that you might otherwise make in the future. Bring-forward arrangements involve making extra non-concessional contributions beyond the standard annual cap using your after-tax income or savings.

These contributions enter your super fund without being taxed initially. However, any investment earnings associated with these contributions are taxed at a maximum rate of 15% once they are within the fund (unless these benefits can be, and are converted to Pension). This enables you to contribute more than the non-concessional cap in a single financial year without triggering excess contributions and incurring additional taxes.

It’s important to note that bring-forward arrangements differ from carry-forward contributions. Carry-forward contributions involve utilising previously unused concessional (before-tax) contribution cap amounts over a rolling five-year period. Bring-forward arrangements specifically pertain to non-concessional contributions.

It is important to note that a bring-forward arrangement is triggered automatically (presuming you are eligible) when you make a contribution of more than the annual non-concessional cap in a single financial year.

Once a bring-forward arrangement has been triggered, you have a bring-forward period, which lasts three financial years. This includes the year you triggered the arrangement. Once you trigger a bring-forward arrangement in a particular year, any change to the non-concessional contributions cap during your bring forward period will not be applicable to you, meaning you will be unable to benefit should the cap increase. However, any decrease in the cap will not apply to you either.

Can I use a bring-forward arrangement?

In order to use the bring-forward rules, you must meet all three of the eligibility criteria listed below.

1. Age

If you are under 75 years old at any point during a financial year, you may be eligible to make non-concessional contributions up to three times the annual general non-concessional cap for that year. To qualify, you need to be under 75 for at least one day during the triggering year (the first year) and must not already be in an active bring-forward period. Upon turning 75, you generally have up to 28 days after the end of the month in which you turn 75 to make your contribution. However, some super funds may impose stricter deadlines.

2. Total Superannuation Balance

To make any non-concessional contributions without exceeding the cap, your total superannuation balance must be below $1.9 million as of 30 June in the financial year preceding the one in which you plan to contribute.

Starting 1 July 2024, if your balance is $1.66 million or more on 30 June of the previous financial year, the amount you can contribute under the bring-forward arrangement will be restricted.

How do I start a bring-forward arrangement?

If you qualify to make non-concessional contributions and contribute more than the annual general cap ($120,000 for 2024–25) within a single financial year, you automatically activate the bring-forward rules. The only thing you need to do is make your contribution. This means you gain access to the non-concessional contribution caps for future years.

Tip: Any movement of funds into super must be discussed with your advisor to ensure you obtain the best result and avoid breaching caps.