Scott Morrison has announced this morning that the $500,000 lifetime non-concessional cap will be replaced by a new measure to reduce the existing annual non-concessional contributions cap from $180,000 per annum to $100,000 per annum.
Here’s what you need to know:
- the $500,000 lifetime non-concessional cap (after tax contributions) is no longer;
- there will be a reduction of the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year;
- individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums;
- individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional contributions from 1 July 2017;
- reversal of the measure to allow the work test to extend from age 65 to 75 (we have already seen draft legislation on this too);
- deferral to 1 July 2018 of the proposed concessional contributions catch up, where 5 years of previously unused concessional contributions cap could be contributed and claimed as a deduction in that one year;
- the $1.6 million non-concessional contribution cap threshold will be indexed based on CPI, but in $100,000 increments;
- the bring forward can be utilised in $100,000 lots, so assuming the client is eligible to use the bring forward, and their balance was $1.49 million as at 30 June 2017, they could contribute $200,000. In contrast, if the member balance was $1.51 million, they could only contribute $100,000; and
- The concessional contribution cap is still proposed to be $25,000 per annum after 1 July 2017.
The new non-concessional contribution cap will commence from 1 July 2017 – meaning those interested will have a window to contribute $180,000 or $540,000 into super until 30 June 2017 (regardless of balance but still subject to the current age and work test restrictions).
It must be remembered that these new proposed measures are still that, a proposal.
What is important to note, however, is that these measures are from 1 July 2017 – so it is with a high degree of certainty that any changes to these measures will still be from 1 July 2017.
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