The government has announced changes to the controversial superannuation proposals released in this year’s Federal Budget.

With months of lobbying under his belt, it appears that Scott Morrison has reached some agreement with fellow party members, releasing the new policy for “even fairer, more flexible and sustainable superannuation.”

Lifetime cap:  Scrapped

The biggest change is the complete scrapping of the controversial $500,000 Lifetime Cap on non-concessional amounts. 

The government has been under intense pressure since the lifetime cap was announced, due to the harsh and retrospective nature of potentially including all contributions from 1 July 2007.  It angered many voters and politicians on both sides of parliament.

In its place, the government has reverted to the existing system – an annual non-concessional cap – but only if superannuation entitlements are less than the magic $1.6m threshold.  No non-concessional contributions will be able to be made if your superannuation entitlement exceeds this threshold.

Intriguingly despite this threshold, the government has proposed to reduce the annual cap from $180,000 to $100,000.

The ‘three year bring forward’ system will also remain.

Work test for over 65s:  Re-introduced

In an apparent trade off, the work test for those aged 65 to 75 will continue to apply.
This is surprising in light of last week’s release of  Bills and explanatory material by the government to remove this requirement.

‘Catch up’ concessional contributions:  Delayed

The best superannuation reform in the Federal Budget was for unused contribution caps to be carried forward on a five year rolling system.  This allowed those with interrupted work patterns, or lumpy annual incomes to be able to catch up super. It was a policy that really worked for those on parental leave, changing careers, or with variable incomes.

Now, this policy will be delayed by 12 months.

An opportunity?

The removal of the lifetime cap is a trigger for all taxpayers to reassess their super contributions.

None of the changes will apply until at least 1 July 2017, so the current rules are back in play.  Accordingly, the annual non-concessional cap remains at $180,000 p.a., together with the concessional cap of $30,000 or $35,000 (depending on age).

Further, for those under 65, it remains possible to take advantage of the three year bring forward system to increase superannuation contributions up to $540,000 for the last time this year.

Should you have any queries, or would like to discuss how this applies to your specific circumstances, please do not hesitate to contact:

Dennis Eagles
National Head of Self Managed Superannuation
Partner – Private Advisory
T +61 7 3222 0242

Stephen Kuchar
Partner – Private Advisory
T +61 8 8372 6550

Sharon Gdanski
Associate Director – Private Advisory
T +61 3 8320 2230

Simon Gow
Senior Manager – Private Advisory
T +61 8 9480 2036

Minny Talasch
Manager – Private Advisory
T +61 2 8297 2059

Deanne Quinn
Manager – Private Advisory
T +61 7 4046 8812

This article is factual in nature and does not consider your personal objectives, situation or needs.  The information is objectively ascertainable and therefore does not constitute financial product advice.  If you require personal advice, you should consult an appropriately licensed or authorised financial adviser.