On 15 September 2016 the Federal Government announced significant changes to the proposed superannuation reforms previously announced on Budget night. This came after much pressure from both the public and the financial services industry stating that these proposed measures were counterproductive and difficult to administer.
In summary, the following proposed changes were announced:
- The proposed lifetime cap of $500,000 per person for non-concessional contributions will not go ahead, This is a great outcome!;
- From 1 July 2017, the annual non-concessional contribution cap will reduce to $100,000 from the current amount of $180,000. If you are under the age of 65, you may still be able to use the 3 year ‘bring forward’ provision but at the lower amount of $300,000 (i.e. $100,000 x 3 years);
- From 1 July 2017, only those with a superannuation balance below $1.6 million (assessed as at the previous 30 June) will be able to make non-concessional contributions;
- The Government will retain the existing requirement that you must meet a work test to be able to contribute to superannuation between ages 65 and 74 (they had originally proposed to remove this requirement); and
- There are no changes to the proposals around concessional contributions (including lowering the cap to $25,000) other than delaying the “catch-up” opportunity for those with less than $500,000 in super by 12 months to a 1 July 2018 commencement.
It’s important to be aware these proposed changes are not yet law but are expected to be introduced into Parliament by the end of 2016. There is likely to be a consultation draft released prior to that which is expected to have more detail on the changes.
These changes may represent a real opportunity for you!
Whilst we await draft legislation to confirm the exact mechanics of these announcements, the following opportunities arise before 1 July 2017:
- Those previously unable to make any more non-concessional contributions (having already exceeded $500,000 in non-concessional contributions since 1 July 2007) may now be able to make some additional contributions;
- Those whom have superannuation balances in excess of $1.6 million may have a one-off opportunity to contribute this financial year as the $1.6 million cut off only applies for contributions from 1 July 2017; and
- If you are under age 65 you could trigger the 3 year ‘bring forward’ provision this financial year and contribute up to $380,000 prior to 30 June 2017. This may be a real opportunity for those who were concerned they wouldn’t be able to make any further contributions into the tax effective superannuation environment.