The first Luke knew that he had a tax bill for super was when he received an excess non-concessional contribution assessment from the ATO. ‘How did that happen? But I’ve done everything right’, he thought. Maybe I need to retrace my steps to see where the problem is.
As Luke went through his tax and super information, he saw that for the 2017/18 tax year he had contributed non-concessional contributions of $300,000, which was ‘OK under the rules’, according to him. From what he understood, it was possible to access the three years bring forward rule that applied because he was under 65 at the beginning of the year. Then he went to the 2016/17 tax year and saw he had contributed $180,000, which was the standard non-concessional contribution cap for that year and did not trigger the bring forward rule.
All this just didn’t make sense, until he looked at the ATO’s assessment, which showed an excess of $104,000. Then he remembered every year $2,000 was automatically deducted from his bank account to pay the premium for a superannuation insurance policy. The effect of paying the premium was to trigger the bring forward rule one year earlier in the 2016/17 tax year, rather than in the 2017/18 financial year as he had planned. Thus the excess.