15 Sep 2016
Government announcement re. Superannuation
The Government today announced it has dropped the proposed $500,000 lifetime cap on non-concessional contributions. This was the most controversial measure announced in the Federal Budget back in May and has been the source of many media articles in recent months.
According to the Treasurer’s press release the measures announced today make the system even fairer, more flexible and more sustainable.
The amendments to the Budget package are:
- The $500,000 lifetime non-concessional cap will be replaced by a new measure to reduce the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year;
- Individuals under age 65 will continue to be able to bring forward 3 years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums;
- Individuals with a super balance of more than $1.6m will no longer be eligible to make non-concessional contributions from 1 July 2017. This limit will be indexed and tied to the pension cap of $1.6m.
- The ‘work test’ for people aged 65 and over will not be scrapped. In order to make contributions after age 64, people must meet a work test of 40 hours in a 30-day period in the financial year in which they want to contribute. This test will remain in place.
The press release suggests that the Government remains committed to the reduction of concessional caps to $25,000 per year by saying that, with the bring forward rule, a member would be able to contribute $325,000 into super in a year.
The aim of these amendments is to restrict superannuation from being used as an estate planning vehicle while providing greater support to people investing in superannuation to provide a higher income level to support them in their retirement.
For further information, contact your McLean Delmo Bentleys Advisor.
Partner - Superannuation