The Government has announced today that it will be scrapping the proposal to put a lifetime limit on non-concessional contributions of $500,000 per individual.
To replace the scrapped measure, the Government are now proposing there be an annual non-concessional cap of $100,000 per individual. The existing three year bring forward rule for individuals aged under 65 will apply to this new annual cap. Individuals with balances in superannuation that exceed $1.6 million will not be permitted to make non-concessional superannuation contributions from 1 July 2017. In addition, the Government has announced that the work test will remain for individuals aged between 65 and 74.
The Government has also announced they will delay by a year the ability for individuals to make catch-up concessional contributions.
The proposal of a lifetime cap was perhaps the most contentious of the super reforms announced in the 2016 Federal Budget earlier this year. If the proposal had gone through, it would have meant that each individual would need to calculate the amount of non-concessional contributions made from 1 July 2007 up to Budget night (7pm, 3 May 2016) to determine if they were eligible to make any further non-concessional contributions. Following the 2016 Federal Budget announcement there were fierce debates about whether counting contributions made from 1 July 2007 constituted retrospectivity.
Here is an update on the main superannuation reforms as currently proposed by the Government:
Superannuation Contributions Tax
Division 293 income threshold to reduce from $300,000 per year to $250,000 per year.
Pension balances to be capped at $1.6 million per individual from 1/7/2017.
Transition To Retirement Pensions
Removal of tax exemption on earnings for pension assets supporting transition to retirement pensions from 1/7/2017.
Annual cap reduced to $25,000 per year for all age groups from 1/7/2017.
Individuals with a superannuation balance less than $500,000 allowed to make additional catch-up contributions from 1 July 2018.
Annual cap of $100,000 per individual, providing their total superannuation balance is below $1.6 million.
Three year bring-forward rule to remain for individuals aged below 65.
Tax Deductions For Personal Contributions
Individuals aged up to 75 years allowed a tax deduction in their individual tax return for personal superannuation contributions, regardless of whether they earn over 10% of their income from employment activities.
Contributions Work Test
Individuals aged 65 to 74 will still need to pass a work test to be able to make voluntary superannuation contributions.
Any information contained in the above bulletin is purely factual in nature and does not take into account any individual’s personal objectives, situation or needs. The information is objectively ascertainable and was not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001.