It may have taken a long time for the outcome of the Federal Election to be known but it appears that it may take even longer before the fate of the superannuation system becomes clear.
Superannuation was always going to be an election battlefield but the huge number of changes announced in the Federal Budget have put the Government under pressure from not only the Labor party, but their own members with a number of Coalition backbenchers threatening to cross the floor if the proposals remain in their current form.
While the budget proposals of a $1.6 million cap on tax-free retirement accounts and reduction in the annual concessional contribution cap to $25,000 have proved unpopular, it is the $500,000 lifetime cap on non-concessional contributions (NCC) that has drawn the most extensive criticism. It is being argued that the limit is an insufficient amount and should be at least $1 million, and also that as it includes all NCC made since July 2007 it can be seen as theoretically retrospective, even if it isn’t technically.
However, it now appears that the Government is prepared to soften this rule and provide a number of “carve-out” provisions. These provisions appear to allow people to exceed the $500,000 lifetime limit in certain areas, possibly including:
- Contributions needed to settle transactions on contracts signed prior to budget night, May 3 2016
- Contributions needed to bring related party Limited Recourse Borrowing Arrangements (LRBAs) under arm’s length terms
- Receipt of an inheritance
- Other one-off “life-events”.
Although all of this remains speculation, it does seem to indicate the Government is preparing to back down and try to find a compromise on this issue. The only certainty is that whatever the final legislation looks like, it will be more complex than it ever was and create an administrative burden on the superannuation system and ultimately, on all Australians. It is now fair to say that in just ten years, Peter Costello’s dream in 2006 of a “Simpler Super” retirement vehicle for Australia has almost officially been replaced by Scott Morrison’s nightmare of “Confusing Super” in 2016.
We will continue to provide updates on the legislative environment as they come to light, should you have any queries in the interim, please contact your Hanrick Curran Advisor or speak with 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.