Changes to Superannuation 2017 - What You Can Expect (Part 3)

Non-concessional Contribution Issues

New superannuation legislation will take effect from 1 July 2017. It has received Royal Assent so will apply in its present form.

The information contained in this paper is of a general nature and does not take into account personal circumstances. Before making any decisions based on the factual information contained in this document, please consult with your financial adviser.

The existing non-concessional contributions caps are as follows:

• $180,000 annual non-concessional cap
• $540,000 maximum 3 year bring forward rule for people under 65 years
• A "work test" which requires individuals between 65 years and 74 years to work ≥ 40 hrs in a 30 day period in order to be eligible to make contributions

From 1 July 2017, existing non-concessional contribution caps will be replaced with:

• Annual non-concessional cap of $100,000 (equal to four times the concessional contributions cap)
• 3 year bring forward rule allowing up-front contribution of a maximum $300,000 for the current and next two income years (if <65 years old)

• An important non-concessional contribution cap of nil will apply to an individual with a total super balance (as at the most recent 30 June) of ≥$1.6 million (e. such individuals will be unable to make non-concessional contributions although concessional contributions may still be made)
• Retention of the existing "work test" which requires individuals between 65 and 74 to work ≥40 hours in a 30 day period in order to be eligible to make contributions

The $1.6m eligibility threshold will be based on an individual’s balance as at 30 June the previous year. This means if the individual’s balance at the start of the financial year (the contribution year) is more than $1.6m they will not be able to make any further non-concessional contributions. Individuals with balances close to $1.6m will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6m.

Example – Jason

Jason has a total superannuation balance of $1.45m. He can make a non-concessional contribution in 2017-18 of $200,000. He cannot access the full three year bring forward as this would take his balance over $1.6m. Jason would also not be able to make any further non-concessional contributions.

Please note that the more generous existing contribution caps with no restriction based on total super balance continue to operate up to and including 30 June 2017. Subject to financial advisory, cash flow and other individual considerations, this represents an opportunity to maximise superannuation contributions by using the existing provisions.

More information

For more information and assistance with preparing for the superannuation changes, please contact Ian Walker on 07 3002 2699 or email ianw@archergowland.com.au.