As suspected, Treasury has confirmed changes to May’s superannuation proposals (discussed in our recent blog Superannuation Rumours last week). The three changes announced by the Government are to:
1. Replace the $500,000 lifetime non-concessional contributions cap with a lower annual cap for non concessional contributions;
2. Not proceed with the removal of the ‘work test’ measures; and
3. Defer commencement of catch-up arrangements for concessional contributions.
Details of each are below.
Non-concessional contributions caps
For the current financial year, we continue to operate under existing rules ($180,000 non-concessional contribution cap and the ability for those under 65 to contribute up to $540,000 using the bring forward rules).
From 1 July 2017, the annual non-concessional contributions cap will be lowered to $100,000 and individuals under age 65 able to potentially contribute up to $300,000 using the bring forward rules.
While the proposed $500,000 lifetime cap was scrapped, Treasury has confirmed that individuals will be restricted from making non-concessional contributions that result in their superannuation benefit being more than $1.6 million (where member benefits are measured at 30 June the previous financial year).
Exactly how these rules will be administered is still unclear.
Considering the intended timing of these changes, it would be valuable to consider your superannuation strategy soon to maximise potential opportunities through this transition period.
Work test for over 65 to remain in place
Currently, individuals aged between 65 and 74 are only eligible to make superannuation contributions if they first satisfy the work test (that is they work 40 hours within a 30-day period in the financial year). The proposal to remove the ‘work test’ has been scrapped.
Allowing catch-up concessional contributions
Individuals with member benefits under $500,000 will be able to ‘catch-up’ on concessional contributions where in the previous five years, they have not used their concessional superannuation contributions caps. Unused caps prior to 1 July 2018 do not count.
While this proposal was previously announced, the start date has been pushed back from 1 July 2017. It’s important to note that these proposals are not yet set in stone and the details could change as legislation passes through parliament.