Superannuation Power Moves for High Earners Before June 30: Part 2
Non-Concessional Contributions and the Bring-Forward Rule
While concessional contributions get the headlines for their immediate tax deductibility, non-concessional (after-tax) contributions offer powerful advantages for high earners with substantial cash reserves, expected bonuses, or windfall gains.
Understanding non-concessional contributions is essential for wealth optimisation because they allow you to move significant amounts into the low-tax super environment beyond the $30,000 concessional cap.
The Basics: Non-Concessional Contributions Explained
Non-concessional contributions are made from your after-tax income and include:
Personal contributions where you don't claim a tax deduction
Contributions made by your spouse on your behalf
Certain government contributions
Excess concessional contributions that become non-concessional
The annual non-concessional contribution cap is $120,000 per person. Unlike concessional contributions, you don't receive an immediate tax deduction, but you gain significant long-term benefits:
Tax on Earnings: Investment earnings inside super are taxed at just 15% in accumulation phase, compared to your personal marginal rate of 47%. Capital gains on assets held more than 12 months are taxed at just 10% in super versus 23.5% personally.
Tax-Free in Pension Phase: Once you retire and convert to a pension, all earnings and withdrawals become completely tax-free. This means decades of 0% tax on investment returns.
Estate Planning Benefits: Super held in pension phase at death can pass tax-free to dependents, providing estate planning advantages.
The Bring-Forward Rule: Supercharging Your Contributions
The bring-forward rule allows individuals under age 75 to bring forward up to three years of non-concessional caps, enabling contributions of up to $360,000 in a single financial year.
Eligibility Requirements:
You must be under 75 years old
Your total superannuation balance on the previous June 30 must be below $1.9 million
Once triggered, you're committed to the bring-forward period
How It Works:
The bring-forward rule is triggered automatically when you contribute more than $120,000 in non-concessional contributions in a financial year. Once triggered:
If you're under 75 and your TSB is less than $1.66 million: You can access the full three-year bring-forward ($360,000)
If your TSB is between $1.66 million and $1.78 million: You can access a two-year bring-forward ($240,000)
If your TSB is between $1.78 million and $1.9 million: You can only contribute $120,000 (one year)
If your TSB exceeds $1.9 million: You cannot make non-concessional contributions
When This Strategy Shines: Optimal Use Cases
1. After Receiving a Windfall
High earners often receive significant one-off payments: bonuses, inheritance, property sales, or business sale proceeds. Rather than holding this money in your personal name where earnings are taxed at 47%, moving it to super means earnings are taxed at 15% (or 0% in pension phase).
Example: You receive a $300,000 bonus. After paying tax at 47%, you're left with approximately $159,000. If you invest this personally and achieve 7% returns, you'll earn $11,130 per year, but pay $5,231 in tax, leaving $5,899 net.
Alternatively, if you contribute $300,000 as a non-concessional contribution (using bring-forward):
The full $300,000 goes into super
At 7% returns, you earn $21,000 annually
Tax at 15% is $3,150
Net earnings: $17,850 per year
That's three times the after-tax earnings compared to holding it personally, every year, compounding over decades.
2. Approaching Retirement
If you're in your late 50s or early 60s and have accumulated substantial wealth outside super, using the bring-forward rule can rapidly build your super balance while there's still time for meaningful tax-effective growth.
Example: Jessica, 58, has $1.2 million in super and $500,000 in shares held personally. She uses the bring-forward rule to contribute $360,000 to super over two years.
Over the next 10 years until retirement at 68:
Personal investment of $140,000 at 3.7% after-tax return grows to $201,000
Super investment of $360,000 at 5.95% after-tax return grows to $649,000
The super strategy delivers an additional $448,000 at retirement simply from the tax-advantaged environment.
3. Business Sale or Exit
Business owners planning their exit often face large capital gains. Strategic use of non-concessional contributions can move sale proceeds into super quickly, getting the money into a tax-effective structure before retirement.
4. Spouse Contribution Strategy
You can make non-concessional contributions to your spouse's super up to their cap limits. This is particularly effective if your spouse has:
Been out of the workforce and has low super
A lower total super balance than you
Lower income, reducing the benefit of concessional contributions
Combined Household Strategy: Each partner uses the bring-forward rule to contribute $360,000, moving a combined $720,000 into the tax-effective super environment in a single year.
The Compound Effect: Long-Term Wealth Building
The true power of non-concessional contributions reveals itself over time through the magic of compound returns in a low-tax environment.
Scenario Comparison:
Option A - Personal Investment:
$360,000 invested personally
7% gross return
47% marginal tax rate reduces return to 3.71% after tax
After 20 years: $741,000
Option B - Super Contribution:
$360,000 contributed to super
7% gross return
15% tax in accumulation phase = 5.95% net return
After 15 years in accumulation: $860,000
Converted to pension phase (0% tax)
After 5 more years at 7%: $1,206,000
The difference: $465,000 additional wealth simply from the tax-advantaged super environment.
This example assumes you move to pension phase after 15 years. If you're younger and the money stays in accumulation phase longer, the advantage is slightly reduced but still substantial.
Important Triggers and Considerations
Total Superannuation Balance:
Your TSB is calculated on June 30 each year and includes:
Accumulation accounts
Pension accounts
Self-managed super funds
All super products
Making large non-concessional contributions affects your TSB, which in turn impacts:
Future non-concessional contribution space
Access to government co-contributions
Other strategies requiring TSB below certain thresholds
Bring-Forward Period Lock-In:
Once triggered, you're locked into the bring-forward period for three years (or until your TSB exceeds $1.9 million). During this time:
You cannot trigger a new bring-forward period
Your available contribution space reduces as you approach the total $360,000 limit
Unused amounts from the bring-forward period don't carry forward
Age Restrictions:
From age 75, you cannot make non-concessional contributions at all, making the years before 75 critical for wealth accumulation strategies.
Between ages 67-74, you may need to satisfy the work test (40 hours work in 30 consecutive days) to make contributions, though there are some exemptions.
Excess Contributions:
Exceeding non-concessional caps results in penalties:
Excess contributions are taxed at your marginal rate
You may elect to release excess contributions from super
Associated earnings are also taxed
Always track your contributions carefully to avoid breaching caps.
Before June 30 Action Plan:
Review Your TSB: Check your total super balance from the previous June 30 to confirm eligibility
Calculate Available Space: Determine your non-concessional contribution space, considering any bring-forward already triggered
Assess Liquidity: Ensure you have sufficient after-tax cash available to make contributions while maintaining emergency funds outside super
Consider Timing: Determine whether contributing before June 30 or waiting until after July 1 best serves your strategy
Confirm Fund Details: Ensure your super fund can receive the contributions and process them in time
Document Your Decisions: Keep records of your contribution amounts, dates, and the reasoning behind your strategy
Review With Advisors: Given the complexity and significant dollar amounts involved, professional advice is essential
Disclaimer: This article provides general information only and does not constitute personal financial advice. Superannuation strategies should be implemented with professional advice considering your individual circumstances, including consultation with a licensed financial advisor and tax professional. The information in this article is current as of the publication date but superannuation rules and contribution caps may change.