In a press release issued yesterday, the Government announced a number of changes to three key Federal budget proposals for super reform that we have been waiting patiently to hear about. Perhaps the most significant change announced today is that the Government will not be proceeding with the proposed $500,000 lifetime non-concessional contribution (NCC) limit – but instead will reduce the existing NCC limits from 1 July 2017. Hallelujah! This was going to be a nightmare to monitor and assess for everyone involved and we are sure, would of got a lot of people in trouble.
I know these proposed changes have had some of our clients in limbo land waiting to see what way they should go, especially those preparing for retirement in the not so distant future. Unfortunately though, not all of the proposed changes have been covered in this latest press release and we will keep you updated as soon as we hear. The ones in particular we are waiting on are the changes to the concessional contribution amount you can put into super, and the changes to the tax treatment of transition to retirement strategies.
The items they have covered for the super reform are a number of changes to some of the superannuation reform proposals first announced as part of the 2016 Federal Budget. Broadly, the changes announced today include:
• Replacing the proposed lifetime Non Concessional Contribution limit with lower annual caps for NCCs, and restricting the ability to make NCCs to people with balances over $1.6 million.
What this means for you. The government was going to put in a lifetime cap of $500k that you could contribute to super from your after tax money. This has been scrapped, but from 1 July 2017 you can only contribute $100k per annum or $300k using the 3 year bring forward rule. This really applies to people that are wanting to put money from the sale of assets into super before retirement. For this current financial year though it is still the old rules, $180k or $540k using the bring forward rule. So take advantage of this if you need.
• A deferral to the commencement date for the proposed carry forward arrangements for concessional contributions
This was brought in to allow people with small balances to contribute extra into super with before tax dollars to take advantage of any missed contributions from previous years. They have put this off until July 2018. So really this doesn’t affect anyone as it wasn’t put in place yet.
• Not proceeding with measures to increase the flexibility for contributions for people aged 65 – 74 (i.e. the work test will remain).
Currently to contribute to super you have to work 40 hours in 30 consecutive days if between 65-74, they talked about removing this rule. They haven’t, so again this doesn’t affect anyone as we are still going by the old rules.
At this time no additional details have been released with respect to a number of other proposals. This includes the proposed:
• $1.6 million Pension Transfer cap,
• Reduction to the Division 293 tax threshold,
• Reduction to the concessional contribution cap, I know this is one a lot of our clients are waiting to hear about so we are listening closely for news of this.
• Changes to the tax treatment of Transition to Retirement (TTR) income streams, and
• Removal of the anti-detriment deduction.
We will keep you updated on these last ones as we know more.
Link through to our budget announcement if you want to read more about the proposed changes set out in the budget.Share