Plans for lifetime cap on non-concessional contributions dumped
One notable change involves the government dumping plans for a $500,000 lifetime cap on non-concessional contributions that would have been applied retrospectively dating back to 2007.
The new proposal put forward will allow members to make both concessional and non-concessional contributions to their nominated superannuation fund until the cap of $1.6 million in a members account balance is reached. However, this limit will be tied and indexed to the transfer balance cap.
Reduction to annual contribution cap on non-concessional contributions
An annual contribution cap of $100,000 on non-concessional contributions (down from the current cap of $180,000) will apply until the $1.6 million is reached. Non-concessional contributions to an accumulation account will cease to be available once the $1.6 million is reached.
It is noted that this mechanism will apply to superannuation members individually. Therefore, a fund with two members can have capital up to $3.2 million before further contributions will be disallowed. Further, members aged 65 and under can continue to utilise the three-year bring-forward rule in respect of making lump sum non-concessional contributions.
Minimum work requirements retained
The government has elected to retain the minimum work requirements on people aged between 65 and 74 wishing to make voluntary contributions to their super. The Federal Budget had outlined that this legislation would be abolished. Plans to allow people with interrupted work patterns to roll over unused concessional contributions from the previous year have also been delayed. This will now commence 1 July 2018 rather than 1 July 2017.
Deduction for personal superannuation contributions
The government has also indicated it plans to go ahead with legislation to allow taxpayers to claim a tax deduction for personal superannuation contributions regardless of their employment arrangements and implement the new Low Income Superannuation Tax Offset (LISTO) which replaces the current low income tax contribution which was due to be abolished from June next year. This measure will apply from 1 July 2017 and allow low income earners (those with an adjusted taxable income of less than $37,000) a superannuation tax offset that reduces the tax on their superannuation contributions.