Federal Government announces contributions changes

Friday, 16 September 2016

The Government has announced some changes to the super reforms that were originally outlined in the 2016 Federal Budget in May. Here’s a brief overview of the changes they have made.

May proposal: Introduction of a $500,000 non-concessional lifetime cap.

Update to proposal:

  • This is to be replaced by an annual non-concessional contributions cap, limiting, from 1 July 2017, the amount of non-concessional contributions you can make to $100,000 (down from $180,000 that is currently in place), with a three year bring forward rule of $300,000 (down from $540,000).
  • If your balance is close to $1.6 million, you will only be able to bring forward the annual cap amount for the number of years that would take your balance to $1.6 million.
  • If your balance is more than $1.6 million (balance as at 30 June of preceding financial year), you will no longer be able to make non-concessional contributions.
  • If you have not fully used your concessional bring forward amount before 1 July 2017, your remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps.

May proposal: From 1 July 2017, the concessional contributions cap will be lowered to $25,000 per year. However, individuals with balances less than $500,000 will be provided scope to make “catch‑up contributions”.

Update to proposal:

This stays in place but the “catch–up contributions” provision will only apply to contributions you make on or after 1 July 2018.

May proposal: The current restrictions on the ability of Australians aged between 65 and 74 to contribute to superannuation will be lifted by removing the work test.

Update to proposal:

This change will not go ahead, which means that if you’re aged between 65 and 74, you will have to continue to meet the work test (i.e. work at least 40 hours in 30 consecutive days) to be able to make personal contributions.

Please note: These changes have been proposed, but are yet to be legislated. Any other significant super changes will be posted as they come to hand. In the meantime, if you have any questions about the above, don’t hesitate to get in touch.