Another day, another change to superannuation. The Government has caved in to the pressure from within their own party and scrapped the controversial $500,000 lifetime non-concessional cap. This will instead be replaced by an annual non-concessional contribution limit of $100,000. The “bring forward” rule will also apply which will enable people aged under 65 to make three years’ worth of non-concessional contributions in one year. This new limit will apply from 1 July 2017.
While this may seem like good news on the surface, the catch is that once an individual has reached a superannuation balance of $1.6 million they will be unable to make any further non-concessional contributions. This will put further emphasis on valuations and tracking of multiple superannuation accounts as it will apply to everybody irrespective of age.
The result of this backflip is that old, pre-Budget non-concessional contribution limit of $180,000 remains in place for the current 2016/17 financial year. This potentially offers a final opportunity for people to make after-tax contributions and even utilise the “bring forward” rule contributing up to $540,000 before 30 June 2017. While the opportunity was lost for people who listened to the Government’s budget night announcement and didn’t make contributions between 3 May 2016 and 30 June 2016 believing they were complying with the rules, they will at least get that chance this year.
While the non-concessional limit changes made the headline, there were two other changes confirmed by the Government. Firstly, they will not proceed with the proposal to remove the work test requirements on people aged 65 to 74. Those aged 65 to 74 who want to contribute to superannuation will still need to meet existing work test requirements. The government also confirmed the commencement date for the ability to contribute “catch up” concessional contributions will also be deferred until 1 July 2018.
Of course, these are still proposed changes and the legislation still needs to be proposed and then subsequently passed. However, the Government is confident that they will now get the support required to proceed with all the superannuation changes they have announced. Hopefully this will lead to some certainty that people can rely on in their retirement planning.
Hanrick Curran will continue to remain abreast of changes to the Superannuation legislative environment and provide updates as new information comes to light. For further information on the Superannuation environment or assistance in considering your circumstances in light of these changes please speak with your usual Hanrick Curran adviser or contact Superannuation partner, Clive Todd on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.