Interaction between CGT and ordinary non-concessional contributions and the $1.6m cap

Ordinary and CGT non-concessional contributions have their own separate contribution caps: an annual $100,000 cap and a $1,415,000 lifetime cap (2016/17 dollar value of the cap).  However, while CGT non-concessional contributions can be made even if the total superannuation balance exceeds $1.6m, CGT non-concessional contributions are included in the total superannuation balance and, therefore, they will affect to the extent, if any, to which ordinary non-concessional contributions can be made.

Example 4

Alain is aged 50 and has in respect of the 2018/19 financial year a total superannuation balance of $1.58m.  In respect of 2018/19 Alain makes a $100,000 non-concessional contribution. Alain can make a full $100,000 non-concessional contribution as his total superannuation balance is less than $1.6m.

In respect of the 2019/20 financial year, his total superannuation balance is now $1.65m.  Consequently, Alain is precluded from making ordinary non-concessional contributions in respect of the 2019/20 financial year.  However, Alain is not precluded from making CGT non-concessional contributions (up to the unused CGT non-concessional contributions cap) during the 2019/20 financial year as the total superannuation balance rules does not apply to CGT non-concessional contributions.

If Alain had made the CGT non-concessional contribution in the 2018/19 financial year of $600,000 then his total superannuation balance immediately before the start of the 2019/20 financial year would be about $2.18m.  Consequently, Alain would be precluded from making any ordinary non-concessional contributions in respect of the 2019/20 financial year as his total superannuation balance exceeded $1.6m.  Alain could make further CGT non-concessional contributions in the 2019/20 financial year (up to his unused CGT contribution limit).