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2016 FEDERAL BUDGET SUPERANNUATION REFORMS

ARE YOU CLEAR ON WHAT NON-CONCESSIONAL CONTRIBUTIONS YOU CAN CONTRIBUTE IN A YEAR?

 

With the Government abandoning its policy to introduce a $500,000 lifetime cap for non-concessional contributions are you clear on what non-concessional contributions you can make to superannuation now?

 

Non-concessional contributions are contributions that are made to super from after-tax income or savings.

 

Instead of going forward with its proposed $500,000 lifetime cap on after-tax contributions, the Government has decided to go back to the current rules for after-tax contributions but with a lower annual limit of $100,000.

 

This will now allow people to:

  • make non-concessional contributions of up to $100,000 per year
  • have the ability to bring forward 3 years' worth of contributions to a single year (allowing you to contribute up to $300,000 in a single year

The ability to make non-concessional contributions will also be limited to people who have an individual superannuation balance of under $1.6 million. In addition, if you are aged 65 or over you need to pass the "work test" to contribute to your super and cannot use the bring forward of contributions.

 

The new rules will apply from 1 July 2017.  This means that for the current 2016-17 financial year people can still make non-concessional contributions of up to $180,000 or the bring forward rule up to $540,000 if under age 65.

 

Summary of Contribution Caps:

 

Current Year

1 July 2016 – 30 June 2017

 

1 July 2017 +

Concessional:

 

 

Age under 49 on 30 June 2016

$30,000

$25,000

Age 49 years and over on 30 June 2016

$35,000

$25,000

Non-Concessional:

 

 

 

$180,000

$100,000

Bring Forward Rule -Age under 65

$540,000

$300,000

 

The above changes are not law.

 

The objective implication of the above change is that people who can 'max out' their non-concessional caps before 1 July 2017 can put more money into superannuation than those who don't 'max out' their non concessional caps before 1 July 2017.

 

Please note – We have provided factual information in this communication only. We cannot provide financial product advice and therefore cannot make recommendations in relation to making superannuation contributions and only provide factual information, accounting and tax advice in relation to SMSFs.