Recently the Government announced several changes to the superannuation proposals made in the 2016 Federal Budget.
The following is a summary of the latest proposals. Opinions positive or negative, will be varied depending on individual circumstances!
- Good news for the majority (no more $500k lifetime cap on non-concessional contributions)
- It is proposed that NCC will be limited to an annual amount of $100k with a continuation of the three year bring forward rule effective from 1 July 2017
- The proposed $100k cap will only be available to those with super fund balances less than $1.6 million
- The very good news is that people under age 65 will be eligible to contribute $180k or $540k if eligible in the 2016/2017FY providing they have not triggered the bring forward rule in the two previous years
- It is now proposed that the current work test for those over age 65 will continue from 1 July 2017
Are you clear on what non concessional contributions you can contribute in a year?
Instead of going forward with its proposed $500,000 lifetime cap on after-tax contributions, the Government has decided to go back to the current rules for after-tax contributions but with a lower annual limit of $100,000.
This will now allow people to:
- Make non-concessional contributions of up to $100,000 per year
- Have the ability to bring forward 3 years worth of contributions to a single year (allowing you to contribute up to $300,000 in a single year)
The ability to make non-concessional contributions will also be limited to people who have an individual superannuation balance of under $1.6 million.
In addition, if you are aged 65 or over you need to pass the “work test” to contribute to your super and cannot bring forward contributions to the current year.
The new rules will apply from 1 July 2017. This means that for the current 2016-17 financial year people can still make non-concessional contributions of up to $180,000.
If a member under age 65 hasn’t triggered the bring-forward rule, they could do so this year and contribute up to $540,000 this financial year. This is a real opportunity for higher net worth clients who were concerned they wouldn’t be able to make any further contributions.
Stay tuned for the next instalment when the legislation is formally passed.
In the meantime please call if you need any assistance with these changes.