Super – Amendment to the Amendment

Last week the Treasurer Scott Morrison succumbed to sustained pressure and announced changes to the superannuation reform.

Keep in mind these changes are yet to be legislated.

With the Government abandoning its policy to introduce a $500,000 lifetime cap for non-concessional contributions are you clear on what non-concessional contributions you can make to superannuation now?

Non-concessional contributions are contributions that are made to super from after-tax income or savings.

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.

The changes do reopen a non-concessional contribution window that looked to be closed for many. Additional clarity on 21 September 2016 however, outlines that it is not as generous as first thought by some.

Bring-forward NCCs – transitional arrangements

Where an individual has triggered the bring forward in 2015/16 or 2016/17 but has not used it fully by 30 June 2017, transitional rules will apply.

Where an individual triggers the bring forward in 2016/17, the transitional cap is $380,000 (the current annual cap of $180,000 plus $100,000 annual cap in 2017/18 and 2018/19). See examples 1 and 2 in the table.

If an individual triggers the bring forward in 2015/16, the transitional cap is $460,000 (the current annual cap of $180,000 in 2015/16 and 2016/17 plus $100,000 annual cap in 2017/18).

$1.6 million eligibility threshold

Individuals are unable to make further NCCs where their total superannuation balance is $1.6 million or more (tested at 30 June of previous financial year). Where an individual’s balance is close to $1.6 million, they can only make a contribution or use the bring forward to take their balance to $1.6 million but not beyond.

 

General advice warning: This information on this website is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.

 

 

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