It’s hard to know what to do with a budget handed down by a Government that will not have enough time to pass any measures before it goes into an election. Do you follow the current laws or the laws as they are proposed to be changed in the future (if the Government is re-elected and if it can pass the measures in the newly constituted parliament)? That is the situation we currently find ourselves in with the proposed super changes and in particular the lifetime non-concessional contributions cap.
The proposed lifetime cap of $500K (indexed) will replace the annual non-concessional contribution cap (currently $180K or $540K for 3 years under the bring forward rule). The cap will be measured retrospectively to contributions made from 1 July 2007. Excess contributions must be returned or will otherwise be subject to penalty tax. However, contributions made before 7.30pm on 3 May 2016 will not be treated as excess contributions. That is, the cap will apply retrospectively but the excess contributions regime will apply prospectively (from budget night) such that people who have already exceeded their cap won’t be penalised but can’t make further contributions.
Other super measures include:
- Limiting the size of member’s pensions to $1.6 million (indexed - a rebadged RBL?) - any remaining benefits must be held in accumulation phase
- Preventing transition to retirement income streams from allowing super funds to go into pension phase
- Abolishing the ability to treat payments from pensions as lump sums
- Reducing the concessional cap to $25K (and abolishing the $35K cap for members aged 50+)
- Allowing up to 5 years’ worth of concessional contributions to be made provided your member balance is less than $500K
- Abolishing the 10% rule so all members can make personal deductible contributions up to the age of 74
- Abolishing the work test for members aged 65 to 74
- Lowering the Div 293 threshold for 30% tax on contributions from $300K to $250K
- Abolishing the anti-detriment rule
- Introduction of a low income superannuation tax offset for members with taxable incomes of up to $37K
For further information please contact us.