In September this year the Federal Treasurer announced further proposed changes to superannuation. The proposals provide an opportunity to make greater non-concessional superannuation contributions before lower limits come into effect from 1 July 2017. You can read our previous article about these superannuation changes here.
The current rules allow for non-concessional, or after-tax, superannuation contributions of up to $180,000 per year. If you are under age 65 at any time in the current financial year, there is also the opportunity to ‘bring forward’ an additional two years of annual contributions, meaning up to $540,000 may be contributed before 1 July 2017. Care needs to be taken to ensure that you don’t exceed these limits and you may need to review what contributions you have made in the preceding two financial years if you have previously made an annual contribution exceeding $180,000 (as you may have already triggered the ‘bring forward’ rule).
From 1 July 2017 the Government proposes to reduce the annual non-concessional limit from $180,000 to $100,000. The provision to ‘bring forward’ an additional two years of annual contributions will still be available, meaning only $300,000 can be contributed over the three year period. This is significantly lower than the maximum $540,000 that can be contributed if it was made before 1 July 2017.
If you are over the age of 65, additional rules may apply. To make a non-concessional contribution you may need to satisfy the work test (i.e. be gainfully employed for at least 40 hours over 30 consecutive days in the relevant year) prior to making the contribution. It was previously proposed that the work test requirement would be removed allowing anyone under the age of 75 to contribute irrespective of employment status. Unfortunately the Government won’t be proceeding with this proposal.
$1.6M Account Balance Restriction
A new rule proposed from 1 July 2017 will remove eligibility to make non-concessional contributions if your total superannuation balance as at 30 June in the previous financial year is more than $1.6 million.
The 2016/17 financial year may be the best opportunity to make a non-concessional contribution, particularly if one, or more, of the following situations apply:
- you turn 65 between 1 July 2016 and 30 June 2017,
- you will have more than $1.6 million in superannuation as at 30 June 2017,
- you want to transfer as much as permissable into the superannuation environment; or
- you plan to leave your superannuation to adult children and you want to reduce the potential tax liability upon death.
If any of the above situations apply, please do not hesitate to get in contact with us to discuss the benefits and suitability of making non-concessional contributions while the higher limits for the 2016/17 financial year still apply.
It is important to note that at present these are still proposed changes and have yet to pass through Parliament.
This information should be regarded as general advice and does not take into account your personal objectives, needs or financial situation.