Q. Can you please explain what I am able to contribute to Superannuation this financial year? Given the government announced changes to Superannuation, I am getting mixed messages on how much I can contribute. I am 61 years old, married and employed.
A: On 15 September the Government amended their proposed Super changes as announced in the Budget. In summary the rules that apply to contributions for the 2016-2017 Financial year are as follows.
Employer or personal deductible Superannuation contributions for those age 49 or over on 30 June 2016 will be capped at $35,000 (Concessional Contribution Cap). For those under age 49, the limit is $30,000. From 1 July 2017, the Concessional Contribution cap will reduce to $25,000 for everyone.
For personal contributions (Non-concessional contributions) where a tax deduction is not claimed, you are permitted to contribute $180,000 for this financial year, or provided you are under age 65 you can contribute $540,000 as a “bring forward” of future contributions under the current $180,000 cap.
It’s worth noting that the Government will no longer be proceeding with the $500,000 lifetime non-concessional contribution limit that was announced as part of the 2016 Federal Budget. However, there are proposed changes to the limits for Non-concessional contributions that, if legislated, will take effect from 1 July 2017.
Under these proposals, the annual non-concessional contribution cap will reduce to $100,000. Further, the 3 year “bring forward” of non-concessional contributions will still be permitted, however the maximum “bring forward” amount for “bring forward” periods commencing on or after 1 July 2017 will be $300,000, being three times the annual limit.
Please note special rules are proposed where the 3 year “bring forward” period has already been triggered in the 2015-16 or 2016-17 tax year but not used up prior to 1 July 2017. This could occur if, for example, you contributed in excess of $180,000 but had not contributed up to the full amount of $540,000. In these scenarios, it is proposed that the following transitional arrangements will apply.
- If the “bring forward” was triggered in the 2015-16 tax year, the cap will reflect 2 years of $180,000 and one year of $100,000. Therefore the transitional “bring forward” cap will be $460,000.
- If the “bring forward” was triggered in the 2016-17 tax year, the cap will reflect 1 year of $180,000 and 2 years of $100,000. Therefore the transitional “bring forward” cap will be $380,000.
Where the “bring forward” provisions have been triggered and the cap has been reached, no further non-concessional contributions may be received into the fund until the 3 years has elapsed since the “bring forward” was triggered.
In addition, as part of the most recent proposals, if your Superannuation balance is $1.6 million or greater at 1 July 2017 or subsequent tax years, you will no longer be eligible to make non-concessional contributions to Superannuation in that Financial year. Furthermore, if triggering a “bring forward” contribution will take the balance over $1.6 million, you may only make a contribution that will take you up to $1.6 million.
The government also announced that the contributions work test for individuals age 65 to 75 will now be retained. This test obligates an individual aged 65 or older to have worked at least 40 hours in a 30 day period in a financial year before a personal superannuation contribution could be made. This test was initially proposed to have been abolished from 1 July 2017.
Please note that despite the announcements, no legislation has been released so further changes to the details provided above could be possible.
They key point to recognise is that up to 30 June 2016, the rules that existed prior to Budget night continue to apply, with the changes broadly proposed to apply for contributions made from 1 July 2017.