GOVERNMENT UPDATE TO PROPOSED SUPER CHANGES SEPT 2016

 

Treasurer Scott Morrison has bowed to pressures and announced a favourable compromise deal to the planned superannuation reforms announced in the May at the 2016 Federal Budget.

New Announcement - $500k Non-Concessional Contribution (NCC) lifetime limit scrapped

The major announcement is the removal of the proposed $500k lifetime NCC cap, which was to be backdated to 2007.

For the current financial year, it is intended that current NCC limits ($180k per annum or $540k using the 3 year bring forward) will apply
.

From 1 July 2017 the NCC cap will reduce to $100,000 with a three-year bring-forward rule ($300,000) still to apply.

The important change is that contributions will only be allowed until a balance of $1.6 million is reached - it is unclear if this relates to pensions only or the entire superannuation balance (i.e. accumulation and pension).

More importantly, this presents an opportunity for those with available funds to make additional contributions.

What's staying?


The following measures announced in the 2016 budget appear to remain:

- The reduction to a $25k concessional cap (pre-tax contributions) to commence from 1 July 2017

- Implementation of a 15% tax on Transition to Retirement Pension;

- The application of Div293A tax on contributions for anyone with income of $250k or more (reduced from $300k); and

- A maximum balance of $1.6million that can be transferred to a pension from 1 July 2017.

Timing


Mr Morrison's announcements today indicate that the new propsed changes have bi-partisan support.

Legislation around these measures is to be formally passed by the end of 2016.

Planning impacts


For a number of clients, this will now create a need to take action within the coming months to take advantage of these changes.

This will apply to anyone who planned on making further large contributions to super prior to the may budget or clients with over $1.6million in superannuation/ pension.

We await the final legislation to be released to review specific aspects, however we will discuss individual application on these measures with clients in due course.

In the meantime, should you have any queries, please feel free to contact us to discuss.