Today the Government announced significant changes to the proposed Superannuation reforms, providing more clarity and certainty around Superannuation.
- The $500,000 lifetime Non Concessional Contributions Cap has been scrapped, instead a lower annual Non Concessional Contribution Cap will be introduced, along with a contribution eligibility threshold.
- The Concessional Contribution catch up provisions have been delayed until the 2018/19 financial year.
- The Government has decided not to remove the work test for individuals aged between 65 and 74, meaning individuals in this age bracket will still be required to work for at least 40 hours over a 30 day period in the financial year that they wish to make a contribution.
One of the major wins in these recent announcements is their decision to scrap the $500,000 lifetime non-concessional contributions cap that was announced and effective from 3 May 2016.
Instead a lower annual Non Concessional Contributions Cap of $100,000 (currently $180,000) will be introduced from 1 July 2017, along with a new constraint whereby individuals with a balance of more than $1.6 million will no longer be eligible to make Non Concessional Contributions at all. The $1.6 million eligibility threshold will be based on an individual’s balance as at 30 June the previous year.
This means individuals can still make a Non Concessional Contribution of $180,000 in the 2016/17 financial year, or utilise the bring forward provision allowing a contribution of $540,000 in the current financial year (subject to previous contributions and work test requirements). Going forwards, the bring forward provisions will remain, but will be based on the lower $100,000 cap.
From 1 July 2017:
- Individuals with a Superannuation balance of $1.6 million or more will NOT be able to make any further Non Concessional Contributions.
- Individuals under the age of 65 with a balance below $1.6 million will be able to contribute $100,000 per annum until a superannuation balance of $1.6 million is reached, and will have access to the bring forward provisions.
- Individuals over the age of 65 with a balance below $1.6 million will be able to contribute $100,000 per annum, subject to meeting the work test. However, as per the current rules they will not have access to the bring forward provisions.
Please note that these are proposed changes and have yet to pass through Parliament.
If you would like to discuss any of the changes to Superannuation and how they affect you, please do not hesitate to contact your adviser.
This information should be regarded as general advice and does not take into account your personal objectives, needs or financial situation.