Superannuation Reform Exposure Draft: Non Concessional Contributions
The Government has recently released exposure drafts on its proposed superannuation reforms. The third of these is outlined below and concerns the proposed changes to non-concessional contributions.
As foreshadowed in September, the Government has proposed to lower the annual non-concessional contributions cap from $180,000 to $100,000, effective from 1 July 2017. The revised annual cap continues to include a three-year ‘bring forward’ rule for individuals aged under 65, discussed in further detail below.
Under the exposure draft, individuals with a total superannuation balance of $1.6m or more will be unable to make further non-concessional contributions, even to an accumulation account. The $1.6m limit will apply to an individual’s “total superannuation balance” as at 30 June for the previous financial year.
Individuals will still be able to utilise the three-year bring forward rule for non-concessional contributions from 1 July 2017. The amount individuals are able to bring forward will be determined based on the difference between the general transfer balance cap and their total superannuation balance at 30 June 2017, known as the “first year cap space”.
If the first year cap space is greater than twice the non-concessional contributions cap (i.e. more than $200,000), an individual will be able to contribute 3 times the non-concessional contributions cap (i.e. $300,000). If the first year cap space is between $100,000 and $200,000, an individual will be able to contribute 2 times the non-concessional contributions cap. If the first year cap space is less than $100,000, there will be no bring forward period and the normal non-concessional cap will apply.
This is summarised in the table below.
Individuals who have not fully used their non-concessional bring forward before 1 July 2017 will be able to use their remaining bring forward under a transitional arrangement, reflecting the reduced yearly non-concessional cap of $100,000. If the non-concessional contribution bring forward was triggered in 2015-16, and not fully utilised by 30/6/17, the transitional cap will include the previous cap of $180,000 for the 2015-16 and 2016-17 financial years, and the $100,000 cap for 2017-18 (i.e. a transitional cap total of $460,000). If the bring forward was triggered in 2016-17 and not fully utilised by 30/6/17, the transitional cap will include the $180,000 cap for 2016-17, and the $100,000 cap for the 2017-18 and 2018-19 financial years (i.e. a transitional cap total of $380,000).
The Treasurer has stated that the Government is on track to introduce its superannuation reforms into Parliament before the end of 2016, with changes to have effect from 1 July 2017.
Should you have any questions in relation to the changes, or super reform in general, please contact us or speak to your ESV engagement partner on 02 9283 1666.