Superannuation Update (Special Edition)

Non-concessional contribution cap

The original proposal was to replace the existing non-concessional contribution cap with a lifetime limit of $500,000, including all non concessional contributions made since 1 July 2007.

This measure is replaced with an annual non-concessional contribution (NCC) cap of $100,000 (currently $180,000).

Individuals under the age of 65 are also able to continue using the bring-forward rule.

However, individuals with a superannuation balance of more than $1.6 million will no longer be able to make non-concessional contributions after 1 July 2017.

The individual’s account balance is to be tested at 30 June of the previous financial year.

Those with account balances close to $1.6 million would only be able to make use of the bring-forward rule to the extent that the sum of the fund balance, the current year contribution and each brought forward contribution is less than $1.6 million.

The threshold amount will be linked to the transfer cap amount relating to amounts being transferred to pension phase.

As the existing rules remain until 1 July 2017, those who are able to utilise the existing thresholds should consider doing so once the legislation is finalised.

This is likely to be the last year individuals with super savings of at least $1.6 million will be able to make a non concessional contribution.

Note: There are no changes to the contributions made under the CGT cap amount of up to $1.415 million relating to the small business CGT concessions.

The work test

It was proposed to remove the work test for individuals aged 65 to 74. The Government will not proceed with this change.

This means the work test of 40 hours within 30 days must be satisfied for those aged 65 to 74 to be eligible to make contributions to superannuation.

Concessional contribution catch-ups

The Government will continue with the proposal to reduce the concessional contribution (CC) cap to $25,000 from 1 July 2017.

However, the commencement date for the catch up contributions will be delayed until 1 July 2018.

From 1 July 2018, individuals will be able to make CCs above the annual cap, where they have not fully utilised their CC cap in previous financial years.

Amounts are carried forward on a five year rolling basis. Amounts not used after five years will expire.

This measure is limited to individuals with a super balance of less than $500,000.

There is no detail as to when the account balance is assessed to determine eligibility.

Unchanged announcements from Budget Night 2016

  • Reduce the Concessional contribution cap to $25,000 from 1 July 2017
  • $1.6 million transfer cap for tax free earnings in the pension phase of superannuation and the need to reduce pension balances to this threshold by 1 July 2017
  • Tax on earnings for amounts held in a transition to retirement pension (generally affects a lot of taxpayers around the 55-65 age group)
  • Reduce the income threshold from $300,000 to $250,000 that the additional 15% tax is payable on concessional contributions.
  • Ability for all individuals to claim a tax deduction for superannuation contributions with the removal of the 10% test.
  • Increase of the income thresholds for eligibility for the spouse superannuation contribution tax offset to $37,000 up from $10,800
  • Introduce the Low Income Superannuation Tax Offset (similar to the Low Income Superannuation Contribution which will be abolished from 1 July 2017)
  • Abolish anti-detriment payments