Changes to allowable superannuation contributions
Non-concessional contributions cap – $500,000 lifetime cap replaced by new annual cap
The Government has announced that the 2016-17 Federal Budget proposal to introduce a lifetime non-concessional cap of $500,000 will not go ahead. In its place, the Government has proposed the introduction of an annual non-concessional contributions cap of $100,000 per year.
New annual non-concessional cap
From Saturday 1 July 2017, the Government has proposed lowering the annual non-concessional contributions cap from $180,000 to $100,000. In addition, individuals with a balance of more than $1.6 million will no longer be eligible to make non concessional contributions.
The bring forward rule where individuals under age 65 are eligible to bring forward three years of non-concessional contributions will still be available.
The $1.6 million threshold will be based on an individual’s balance as at 30 June of the previous year. Individuals with balances close to $1.6 million will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.
Transitional arrangements will apply. Where the non-concessional bring forward has been triggered but not fully used before Saturday 1 July 2017, the remaining bring forward amount will be reassessed on Saturday 1 July 2017 to reflect the new annual caps. It may therefore be beneficial to take advantage of the $540,000 non-concessional cap this financial year as it will be reduced from next financial year.
Other proposed changes
In the Government’s media release, it was also announced that they will not proceed with the proposal to remove the work test requirement for contributions for those aged 65 to 74. Individuals between 65 and 74 will be eligible to make annual non-concessional contributions of $100,000 if they meet the work test, but will not be able to access the bring forward provision.
In addition, the commencement date of the proposed catch-up concessional superannuation contributions will be deferred by 12 months to Sunday 1 July 2018.