Q&A: Does the market downturn allow me to resume personal contributions?

My accountant told me last year that I can’t make personal contributions anymore because I have more than $1.6m in super. But my account is worth much less now, does that mean I can go back to putting in up to $100,000 pa?

I’m assuming you meet all the other rules to make contributions (for example, you are under 65 or between 65 and 75 and meet the relevant tests relating to working hours). And I’m also going to assume that you haven’t made contributions in the past that have already used up your contribution allowances for this year or next year. (Using contribution limits in advance is known as a “bring forward” and your accountant will know if you have done this.)

Assuming all these conditions are met, then to work out how much you can contribute in 2019/20 we need to look back at what your super was worth at 1 July 2019. If, back then, it was still at or above $1.6m then your “non-concessional contributions cap” is $nil for 2019/20. (Non-concessional contributions are contributions you make from your own money without claiming a tax deduction and your non-concessional contributions cap is the limit on these contributions. If you contribute more than your limit you’ll be required to take the contributions back out again and pay some additional taxes.)

But if your balance has dropped a lot you may be able to make non-concessional contributions next year. 

Your contribution limit in 2020/21 will be based on how much your super is worth at 1 July 2020. If it’s (say) $1.55m at that time, you can make $100,000 in non-concessional contributions during 2020/21. Again, it’s important that you meet the other conditions for making contributions (for example, under 65).

If your super is much lower (say $1.35m) at 1 July 2020 you may actually be able to make even higher contributions by “bringing forward” future years’ contribution limits. The bring forward rules are special extra rules that allow you to make non-concessional contributions for the current year (2020/21 in this example) and also the following 1 or 2 years. The number of years and the amount you can contribute will depend on how much your super is worth at 1 July 2020. Remember too, there are extra rules that apply when people want to use the bring forward rules. In particular, you have to be under 65 at the start of the year. It’s worth checking these with your accountant before making the contributions.

In each case, if you have super in more than one fund you need to add them all together. When we talk about “what your super is worth”, it means all your super across all the funds you belong to.

And remember, all of this hinges on how much your super is worth at 1 July 2020. If markets bounce back and you are over the $1.6m limit again by then, you’re right back to where you started.