Last week the government announced changes to their superannuation proposal announced in the May Budget. It’s important to remember that these are not yet legislated so we will have to wait and see what happens next….but if you are thinking about making contributions it would be worthwhile taking these into consideration.
So, what are the ‘new’ rules?
The most significant change is the scrapping of the $500,000 lifetime limit back to an annual non-concessional cap. Currently the cap is $180,000 per year with a proposal to drop this to $100,000 per year from 1 July 2017.
The three year bring forward rule will remain for those under 65, but based on the new annual limit this will mean that the ‘bring forward’ cap will effectively reduce to $300,000.
However, for those with a balance of more than $1.6M, no further non-concessional contributions will be allowed.
The government has also back-flipped on the removal of the work test, meaning those aged 65 to 74 will still need to work to be eligible to contribute to super.
The most significant proposals that are to stay as originally announced in May are:
- The implementation of a $1.6M pension balance cap
- Removal of the tax exemption on earnings on Transition to Retirement Income Streams pensions
- Removal of the 10% rule - meaning anyone can make additional personal concessional contributions, not just those that are ‘self-employed’
- A reduction in the concessional cap to $25,000, regardless of age.
Again, these are proposed changes and can’t be relied on at this stage. Importantly, the devil is often in the details….which are yet to be announced.
If you are thinking about making a contribution to super, please contact your accountant first so we can consider the issues relevant to you.