The government announced significant changes to the superannuation system in the May budget which we originally posted on in Budget 2016/17 - How does it affect my retirement? Several of these proposed changes will now be abolished or replaced by alternative savings measures.
What are the new proposals?
- The $180,000 non-concessional (after tax) contributions cap will be reduced to $100,000 from 1/7/17. Only people with super balances under $1.6m will be eligible to utilise this cap.
- The proposed, highly contentious, $500,000 lifetime non-concessional contributions cap will now not proceed.
- Individuals aged 65-74 will now continue to have to meet a work test before they are able to make any contributions to super.
- The start date for giving people the ability to "catch up" concessional contributions will be deferred to 1/7/18.
- All other measures including the $1.6m pension cap are proposed to go ahead.
What does this mean for me?
If you are under 65 and planning on getting more of your after tax dollars into super, you will now be able to contribute under the existing rules until 30/6/17. This means that regardless of your balance, you can contribute up to $180,000 during the 2017 Financial Year or by using the bring forward rule, up to $540,000 (if you use the bring forward rule in the 2017 financial year you will be limited to making $540,000 of contributions in total across the 2017, 2018 and 2019 Financial Year). From 1/7/17 the limit will change to $100,000, or if you use the bring forward rule, $300,000, but only if your super balance is below $1.6m. If your balance is above $1.6m you will not be able to make any after tax contributions from 1/7/17.
If you are aged 65-74 and not working, the changes will mean you cannot make any contributions to super. If however you meet the work test, you will be able to contribute up to $180,000 of after tax money during the 2017 Financial Year (assuming you haven't utilised the bring forward rule in the previous two years). From 1/7/17 the limit will change to $100,000. If you are aged over 65 you cannot utilise the bring forward rule.
The changes mean that many people who thought they would not be able to make any further after tax contributions, may now have the ability to contribute, This ability will expire for people with a balance over $1.6m on 30/6/17.
Before making any contributions you should seek advice as to your specific circumstances.