The federal government has made significant changes to its superannuation package, including dumping plans for a backdated, lifetime cap of $500,000 on non-concessional contributions, in order to win over the back bench and ultimately, the Senate.
Superannuation Packaging – how will you be affected?
In a compromise that was approved by the party room, the $500,000 cap backdated to 2007 has been removed and replaced by a mechanism in which people would be able to make bot concessional and non-concessional contributions until the cap of $1.6 million in a super retirement account was reached.
There will be a yearly cap of $100,000 on non-concessional contributions, down from the current $180,000-a-year-cap, until the $1.6 million is reached.
After that, there can be no more non-concessional contributions, even to an accumulation account.
People aged under 65 can continue to bring forward three years worth of non-concessional contributions in recognition that such contributions are often made as lump sums.
Removing the $500,000 lifetime cap for the $100,000 annual cap would cost the budget $400 million in revenue over four years.
To recoup this, the government has scrapped a proposal to allow those people aged between 65 and 74 to continue making voluntary contributions to their super even if they are no longer working.
The government has also delayed by a year – 1 July 2017 to 1 July 2018 – plans to allow people with interrupted work patterns to roll over unused concessional contributions caps from the previous year.
If you would like to know the impact of these changes on your superannuation or any other Financial Advice you may seek, please contact Fortunity on 4304 8888.