With the government abandoning its policy last month to introduce a $500,000 lifetime cap for non-concessional contributions, let’s be clear on what is now proposed.
The government has decided to leave in place the current rules for non-concessional contributions, but reduce some of the limits.
If the new legislation is passed effective 1 July 2017, the current $180,000 annual non-concessional contributions limit will reduce to $100,000.
Some people can utilise a ‘bring forward’ rule that allows them to make up to three years of non-concessional in the one year.
With the reduction to the annual limit, this also reduces this amount from $540,000 to $300,000 from 1 July, 2017.
So, in the 2017 financial year, it is important to review your superannuation and seek professional advice.
To be clear on terminology, non-concessional contributions are contributions a person makes to their superannuation account from after-tax income or savings.
The revised changes will also disallow individuals with more than $1.6million in superannuation to be eligible to contribute non-concessional contributions.
This is effectively imposing a new form of lifetime contributions cap of $1.6million, instead of the previously proposed $500,000 lifetime cap.
Due to these changes to the proposed lifetime contributions cap we now also see the removal of the proposed harmonisation of contribution rules for those aged 65 to 74.
This was going to allow people aged 65 to 74 to still make contributions to superannuation without needing to pass a work test, which they have to do under current legislation.
You should seek advice before making significant contributions to superannuation, as this article is general in nature and does not consider your specific circumstances.