Changes to the Superannuation System

At the last federal budget, the government proposed a number of changes to the superannuation system which are due to commence on 1 July 2017.  When Parliament met for the first time last week, some of these changes were amended.

In the budget the government announced that there would be a lifetime limit of $500,000 for Non-Concessional (after tax) contributions. This has been altered to $100,000 per annum with the capacity to bring forward 2 years. The current rule allows for $180,000 pa with the same bring forward provisions.

The cap is set at four times the Concessional (before tax) Contribution cap which is periodically adjusted for inflation.

Those with balances over $1.6 Mil will no longer be able to make Non-Concessional contributions.

One of the more favourable proposals in the budget was the removal of the work test for those aged 65-74.   This proposal allowed anyone under age 65 to make contributions regardless of their work situation. Unfortunately, this decision has been reversed.  In order to make contributions after age 65, a client is required to work 40 hours over a period of 30 days within the financial year a contribution is made.

One of the more publicised reforms was limiting Concessional contributions to $25,000 per annum.  This included allowances for catch up provisions for those with balances under $500,000 that had not fully utilised contribution caps in previous years. Initially, the catch up provisions were to begin next financial year, these are now to begin in the 2018-19 financial year.

The remainder of the superannuation changes remain as proposed in the federal budget.

The new superannuation provisions make it difficult to deposit large amounts of money into super over a short period of time.   This makes it even more important to start saving for retirement as early as possible.