In July 2007 the Government introduced legislation identified as “Simple Super”. Late last week, the Government released the third tranche of exposure draft legislation in relation to the superannuation reforms initially announced in the 2016-17 Federal Budget, sadly, Simple Super may not be so simple for some in the 2016/2017 and 2017/2018 FY’s.
This third piece of draft legislation addresses the lowering of the annual non-concessional cap (NCC) to $100,000 and restrictions on the eligibility for individuals with superannuation balances below $1.6 million to make further NCC.
Our recent broadcasts provided details of the proposed changes to the $1.6m transfer cap and the reduction of the NCC cap to $100,000 annually or $300,000 if eligible to use the three year bring forward rule.
The aim of this broadcast is to provide details of the potential impact of triggering the bring forward rule in the 2016/2017 FY for members with balances close to the $1.6m cap.
David is 61 years old and has a total superannuation balance of $1.54 million on 30 June 2017.
As the difference between the general transfer balance cap ($1.6 million) and David’s total superannuation balance ($1.54 million) is less than the general non-concessional contributions cap ($100,000), David is not eligible to bring forward any future non-concessional contributions caps.
Therefore David’s NCC for the 2017/2018 FY is limited to $100,000 and once he has exceeded the $1.6m he is no longer eligible to make further NCC.
On the surface this does not appear to be to complicated however the ability to advise clients in relation to the bring forward rule for the 2016/2017 FY and the following two financial years is subject to the value of the member’s benefit at 30 June 2017. Additional complications may also arise where members have more than one superannuation interest.
While this proposed legislation is open for submissions, the closing date is 21st October, yes this Friday!
I’m not aware of anyone with a crystal ball but how can someone tell what the value of their super assets will be at 30 June 2017?
Clearly there is a lot of water to go under the bridge before any legislation is passed.
Once we have legislation, SMSF Works will be holding a series of workshops (we suspect early in 2017) in order to identify the appropriate strategies for our clients.