• Federal Budget 2016 - Individuals

Superannuation – $500,000 Lifetime Cap for Non-Concessional Contributions (after tax contributions)

From Budget night 2016, individuals will be limited to a lifetime non-concessional contribution cap of $500,000 which will replace the existing annual non-concessional contribution cap of $180,000 per year (or $540,000 if the 2 year bring forward rule was applied).

Individuals who have already exceeded the $500,000 lifetime non-concessional contribution cap prior to Budget night will not be penalised or required to remove the excess component from their superannuation savings.

However, individuals making non-concessional contributions after Budget night 2016 will need to be mindful of all non-concessional contributions they have made from 1 July 2007, as the lifetime cap after Budget night applies to all non-concessional contributions made after 1 July 2007.

Example 1

Phillip makes the following non-concessional contributions:

2007/08     $450,000 using the bring forward rule 
2011/12    $450,000 using the bring forward rule
2014/15    $450,000 using the bring forward rule
Total     $1,350,000 non-concessional contributions.

Under the proposed reform, Phillip has exceeded his lifetime non-concessional cap of $500,000 and he will be excluded from making any further non-concessional contributions in his lifetime, however, he will not have to return any ‘excess’ non-concessional contributions.

Example 2

Julia makes the following non-concessional contributions:

2013/14     $150,000 
2014/15    $180,000
Total     $330,000 non-concessional contributions.

Julia is limited to making total non-concessional contributions of $170,000 between Budget night 2016 and when she reaches age 74.

BDO Comment

According to the Budget Papers the ATO have reliable records that will be used to calculate an individual’s total non-concessional contributions post 1 July 2007.

Superannuation fund members will be well advised to ensure they can provide evidence of their non-concessional contribution history should they be challenged by the ATO.

We believe the proposed changes to non-concessional contribution caps will impact those Australian’s whose intention is to provide for their retirement and not rely on the public purse.

The reduction in the non-concessional contribution cap is short term thinking from a Government about to go into election mode.

Clearly what Australians want is a superannuation and retirement system that is robust, fair and not constantly changing.

We believe the continual changes to the superannuation regime will discourage younger Australians from making any contributions, other than the compulsory super, which will not adequately provide for their retirement.