You may be aware of the proposed superannuation changes that the Government announced in the May 2016 Federal Budget. Last Thursday, Treasurer Scott Morrison advised that some of these proposed measures have changed. This article will go some way to providing you with the latest information.
With superannuation being a moving feast it can be hard to keep up and know how you are affected. Your financial adviser can help you to understand these changes in relation to your personal circumstances and help you understand what opportunities this may present.
What are the changes?
The lifetime contribution cap has been abolished
In the May 2016 Budget, the Government proposed the introduction of a $500,000 lifetime cap on non-concessional (after-tax) contributions to superannuation.
What has changed?
This lifetime cap of $500,000 has been replaced by these proposed changes, starting 1 July 2017:
- a non-concessional contributions cap of $100,000 per year
- individuals under 65 as at 1 July each year can ‘bring forward’ three years of non-concessional contributions
- individuals with over $1.6 million in super can no longer make non-concessional contributions.
These proposals won’t take effect until 1 July 2017, so the existing non-concessional contributions caps will continue to apply for the current 2016-17 financial year:
|Age at 1 July 2016||Does the work test need to be met?||Annual non-concessional contributions cap||Can the $540,000 cap be used?|
|64||Only if the member is 65 at the time of making non-concessional contributions||$180,000||Yes|
|65 or older||Yes||$180,000||No|
The work test will now continue from age 65
In the May 2016 Budget, the Government announced it was removing the work test for contributions made on or after an individual’s 65th birthday. This would have allowed individuals over age 65 to contribute to super without having to be gainfully employed for at least 40 hours over a consecutive 30-day period.
What has changed?
This change has been abandoned and so individuals looking to contribute to super from age 65 will still need to satisfy the work test, so the current rules will continue to apply.
The ‘catch-up’ of concessional contributions will be delayed
In the May 2016 Budget, the Government announced that from 1 July 2017, the Government proposed to reduce the cap on concessional contributions (such as employer and salary sacrifice contributions) to $25,000, and then allow individuals to ‘catch-up’ on any unused concessional contributions within the next five years, if their superannuation balance was less than $500,000.
What has changed?
While the reduced concessional contributions cap is still proposed to apply from 1 July 2017, the ability to ‘catch-up’ on any unused concessional contributions has been delayed until 1 July 2018.
Do you have a question?
Despite this new round of changes, superannuation remains a very tax-effective way for you to build up your retirement savings. However, these proposals need to successfully pass through Parliament before becoming law and may be subject to further change during this process.
For more information on how these changes could affect you, contact one of our advisers today.
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