After months of backlash from the wealthy and Abbott’s media friends, and frequent point-scoring from Labor, the Coalition government has finally conceded and changed its package of superannuation reforms. In particular, it has removed its proposed lifetime cap of $500,000 on non-concessional contributions, which was backdated to 2007. Widely seen as the most controversial of the superannuation changes proposed in the Federal Budget by Treasurer Scott Morrison in May, it will be rolled back as part of the amendments to the Government’s superannuation tax reform.
On Thursday 15 September, Treasury outlined the changes to the proposed superannuation reforms. The most important of these were:
• The replacement of the proposed $500,000 lifetime cap on non-concessional contributions with a generous allowance of $100,000 a year, which is still a reduction from the current $180,000 a year.
• The introduction of restrictions on non-concessional caps when a superannuation balance of $1.6m is reached. We believe this $1.6m covers the total of all the individual’s accumulation and retirement balances. It is unclear what the rules will be for those with defined benefit accounts.
• Non-concessional contributions can now be made up until the age of 74 if the individual is still working. At present, they stop at age 65.
• Deferral of the proposed ‘catch-up’ on concessional contributions until the 2019 financial year (from July 2018).
• Individuals will be able to continue to make concessional contributions up until the age of 74 if they continue to work, and until age 65 if they are not working.
Winners and Losers
There are some clear winners from this change in policy.
