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Extension Of Non-Concessional 3 Year Bring-Forward Rule – Finally Passes

Written by Ivan Fltecher – Senior Adviser

If you were age 66 as of 1 July 2020 (i.e., age 67 by 1 July 2021), then this announcement has come a little too late as retrospectively you qualify under the extended legislation – provided you took action before 30 June 2021 (13 days after the legislation was passed). However, there is some hope with “Further Proposed Changes” – see below.
Back in July 2020 – it was legislated to push the eligible contribution age (without the work test being required) from age 65 to age 67 effective 1 July 2020. It was also proposed (at the same time) to extend the 3 – year bring forward rule to include anyone under age 67. However, this element did not get approved – so we have been in limbo for nearly 12 months – until now.

On 17 June 2021, with 2 just weeks left in the year, legislation extending the age at which members can trigger the non-concessional ‘bring-forward’ rule has passed both Houses of Parliament and awaits Royal Assent (which although is not guaranteed is usually a formality).

Under the new rules, clients can trigger a bring-forward period from 2020/21 onwards if they are under age 67 (previously age 65) on 1 July at the start of the relevant financial year.

This is good news, as it provides more opportunities for people to make non-concessional contributions later in life. The timing of this legislative however is most likely too late if you turned age 67 this financial year.

Impacts by Age Group

For those of you specifically already in the 65-67 age group, I have summarised the impacts as follows:

If you are age 65  as of 1 July 2020 (i.e., Age 66 by 1 July 2021), this now means that next year (2021/22) you can now utilise this strategy to trigger the 3-year rule to make a non-concessional contribution of up to $300,000 or implement a re-contribution strategy.

If you were age 66 as of 1 July 2020 (i.e., age 67 by 1 July 2021), have very limited scope to take advantage of this rule as the window of opportunity that has just opened, closes again on 30/6/21. 
If you have contributed $100,000 this year but hoped to put more in but were not able to due to contribution CAPS, you now have a very small window available to contribute up to a further $200,000 if you have not triggered the 3-year rule previously in 2018/19 or 2019/20.

If you were age 67 or older as of 1 July 2020 – then unfortunately this change is of no benefit as you must have been under age 67 at the start of the financial year.   However, there is some hope with “Further Proposed Changes” – see below.

Further Proposed Changes

In the most recent 2021-22 Federal Budget, the government announced it will remove the work test, meaning that individuals aged 67 to 74 can make or received non-concessional without meeting the work test subject to existing contribution caps.

Unfortunately, there is a lack of clarity/detail around these proposed changes and how they will interact with the bring-forward rule.  At this stage the superannuation community expect this to be also extended to age 74. 

The intended start date is not for another 12 months (1 July 2022).

Let’s hope they don’t wait another 12 months to approve this and clarify if it will also allow the 3-year rule to be extended to age 74.

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