The Federal Government announced significant changes to their proposed super reforms, which will come into effect on 1 July 2017.
The most significant news is that the originally proposed $500,000 life-time non-concessional contribution cap won’t proceed.
Instead, from 1 July 2017, it is proposed that:
The concessional contribution catch-up provisions will be delayed and will now not commence until 1 July 2018. These were designed to enable those with flexible work patterns and lower super balances, such as women taking time out of the workforce to bring up children, to make catch up contributions.
For older workers, the Government has decided to keep the work test for those aged 65 to 74 (previously it was proposed to remove the work test for those aged 65 to 74 from 1 July 2017). This means that if you are aged between 65 to 74 you must prove you have worked 40 hours within a 30 day period in that financial year in order to make a contribution to super.
Please remember that these proposed changes are not yet law but are expected to be introduced into Parliament by the end of the year.
The head of BT Super’s Customer Engagement & Retention, Christine Artin, says these times of change are a great opportunity to take a look at your super and make sure it’s working its hardest for you.
“Our Australian super system has lots of great benefits and is protecting the future of millions of Australians. It can be difficult when there’s uncertainty about proposed changes, but if you’re like most Australians and fall within the lower caps, you really have nothing to stop you from being squarely focused on preparing for your future. Stay focused on your goals!”
It’s always a good time to look at your super and make sure you are on track for a comfortable retirement. For many people the changes will have no effect, but for all it may be a good time to consider seeking advice.
The below information is prepared based on the proposed super changes announced by the Government on 15 September 2016 and contains general information only.
The existing contribution rules or caps for the current financial year ending 30 June 2017 (2016/17) have not changed.
This means that generally, if you are eligible to contribute to super, you will have the ability to make up to $180,000 in non-concessional contributions this financial year. If you were under age 65 on 1 July 2016 and looking to “bring forward” future year/s’ contributions, you may still contribute up to $540,000 this financial year, but should be mindful of how this will limit what can be contributed for the next two financial years.
The government has announced that from 1 July 2017, the non-concessional contributions cap will be reduced to $100,000 per year. Generally speaking, if you are eligible to contribute to super, you may be able to make non-concessional contributions up to $100,000 per year to your super fund. If you are under age 65, the “bring forward” rule still applies to allow an additional two years’ worth of contributions (up to $300,000).
The Government has announced that you will no longer be able to make non-concessional contributions once your super balance reaches $1.6 million from 1 July 2017.
This means, if eligible, a person will still be able to make non-concessional contributions under the current rules in the current financial year ending 30 June 2017. The current limits of $180,000 (or $540,000 for those under 65 seeking to ‘bring forward’ future year/s’ contributions) still apply.
However, from 1 July 2017, if your super balance has reached $1.6 million then you will no longer be able to make non-concessional contributions.
The “bring forward” rules will continue to apply under the proposed changes. Those utilising them this financial year will have the ability to contribute up to $540,000 this financial year. Be mindful though, if you don’t utilise the entire $540,000 before the end of this financial year, your remaining bring forward cap may be reassessed at 1 July 2017 in line with the new caps
We expect legislation reducing the concessional contributions cap to $25,000 will be in place before 1 July 2017, so you should be mindful of the cap before making any contributions.
Currently, however, if you exceed your concessional contributions cap, you can generally apply for a refund once the ATO has notified you that you have breached your cap. We do not expect this process to change. For more information, visit the ATO website at www.ato.gov.au.
The information shown on this site is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed hereto.
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©233714 (Westpac). BT Advice is a Division of Westpac Banking Corporation ABN 33 007 457 141. Information as at 19 September 2016.