IMPORTANT: Update on what the latest super announcement and changes mean for you.
The federal government has revealed a revised plan with some significant changes to its superannuation package. This includes discarding plans for a backdated, lifetime cap of $500,000 on non-concessional contributions in order to win over the back bench and ultimately, the Senate. Treasurer Scott Morrison will also be leaving the pre-budget rules in place till 30 June 2017.
What does it mean for you?
This means you can make an after tax contribution (non-concessional contribution) of $180,000 this year including using the existing provision of bringing forward three years’ worth of contributions up to $540,000 into super before 30 June 2017. This may be the last opportunity if you are under age 65 to contribute up to $540,000 or $1,080,000 as a couple to their super accounts this financial year. This also creates a chance for couples where one partner has a lot more in super than the other, to even up their balances before June 30.
These opportunities are only available if you haven’t already triggered the bring forward rule in the last two financial years (2014-15 and 2015-16) and maxed your contribution caps.
Going forward, the non-concessional contributions will be capped at $100,000 per year, until your total account balance hits $1.6 million. If you are aged under 65, you will still be allowed to bring forward three years’ worth of non-concessional contributions which would now be $300,000 instead of the $540,000 available this financial year.
From 1 July 2017, if you have more than $1.6 million in super, you will be restricted from making any further after-tax contributions. You will still be allowed to keep making pre-tax contributions up to the relevant annual cap though. However, the amount you can transfer out of the accumulation to pension phase, where earnings are tax free, remains set at $1.6 million.
The government has scrapped a proposal to remove restrictions such as minimum work requirements for those aged between 65 and 74 wishing to make voluntary contributions to their super. The government has also delayed plans to allow those with interrupted work patterns to roll over unused concessional contributions from the previous year to 1 July 2018.
Scott Morrison’s revised plan creates a unique planning opportunity this financial year for those looking to significantly boost their super accounts. This will be the last chance to do so before the reduced caps are put into place. If you have money held outside the super system or have an uneven balance between yourself and your spouse, you should contact your Adviser for a discussion as soon as practical.
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