The government has made significant changes to several of its plans around super reform.
The government has announced changes to three of their key 2016 Federal Budget proposals—the most significant being that it will not go forward with its proposal to introduce a $500,000 lifetime cap on non-concessional (after-tax) super contributions.
In a nutshell, the new proposals include:
- As of 1 July 2017, the existing annual cap of $180,000 on after-tax super contributions will reduce to an annual cap of $100,000. The previously proposed $500,000 lifetime limit will be scrapped.
- The proposed carry-forward arrangements for concessional (before-tax) contributions will be deferred to a 1 July 2018 commencement date.
- Work test requirements will remain in place for those wanting to make contributions after the age of 65.
What could the changes mean for you?
The good news is that for the current financial year, the after-tax contributions limit will remain at $180,000. Also, the ability to contribute up to $540,000 by using the bring-forward rules (where eligible) is still available until 30 June 2017.
There are, however, some proposed changes which could be applied in future years. It’s important to note that these proposals are not yet set in stone and the details could change as legislation passes through parliament.
1. Lowering the after-tax super contributions cap
The government will not be proceeding with the proposed $500,000 lifetime cap on non-concessional contributions, as announced in the 2016 Federal Budget.
Instead, the government has proposed that as of 1 July 2017, an annual after-tax contributions cap of $100,000 be put in place, replacing the current cap of $180,000. Those under age 65 will still be able to bring forward three years’ worth of after-tax contributions, up to $300,000 using the bring-forward rules.
Furthermore, the government has proposed that from 1 July 2017, individuals with a total super balance above $1.6 million will no longer be eligible to make after-tax contributions.
2. Deferring the start date for before-tax arrangements
The government plans to defer the commencement date for the proposed carry-forward arrangements for concessional (before-tax) contributions.
Earlier in the year the government proposed that as of 1 July 2018 individuals with a super balance of less than $500,000 would be allowed to make additional before-tax contributions where they hadn’t reached their concessional contributions cap in previous years.
As a result of the new proposal, eligible individuals will only be able to start making additional before-tax contributions, where they hadn’t reached their concessional contributions cap in previous years, from 1 July 2019.
3. Work test to remain in place
The government intends to keep work test requirements in place for those aged 65 to 74 wanting to make contributions to their super.
Previously the government had proposed that as of 1 July 2017 individuals aged 65 to 74 would no longer need to meet work test requirements, whereby they must have worked for a set period of time in the financial year to be able to make voluntary super contributions.
Other things to note
Draft legislation has not yet been released at this stage, and details available are limited.
Start a conversation with us today, we can advise how the latest government proposals could affect you, and put a plan in place to secure your future.
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