On 15 September 2016, the Government announced changes to the superannuation measures announced in the May 2016 Budget. There is now a proposal to lower the existing non-concessional (post-tax) contributions cap from $180,000 to $100,000 per annum with a three-year bring forward period for individuals under age 65 (i.e. $300,000 over three years). The ability to access the bring forward provision will be reliant on an individual’s total superannuation interest balance being less than $1.6 million at 30 June of the previous financial year. The new non-concessional contributions cap of $100,000 per annum is intended to begin from 1 July 2017. Until then, the current treatment of non-concessional contributions apply.
On the face of it, the superannuation contribution and retirement planning changes above are negative, but they are actually an improvement on the prior budget (May 2016) announcement – where it was announced there would be a lifetime cap of $500,000 on non-concessional superannuation contributions (where the lifetime cap would have taken into account all non-concessional contributions made on or after 1 July 2007).
Annually, there is a reduction of what post-tax capital can be contributed into super, but overall it facilitates a larger amount of capital that can be accumulated and benefit from the concessionally taxed environment that is superannuation, and so it’s not all bad.
From 1st July 2017, concessional contributions (ie those contributions from an employer or self-employed where a tax deduction is claimed) will reduce to $25,000 for all age brackets, thereby limiting the amount of salary sacrificing or tax benefit that can be claimed. This will have a greater impact on people’s ability to accumulate a meaningful amount of superannuation prior to retirement, and revised strategising will be needed in the 2018 financial year to ensure maximum financial and tax benefit is gained from these new limitations.
As frustrating as the contribution changes are, superannuation law still makes it possible to accumulate and have $1.6m invested tax-free in retirement, and there is no other structure or strategy that will provide a more tax-effective outcome than this.
From a superannuation legislation point of view, we do need to be mindful of the moving goal posts in relation to preservation of (access to) capital, which needs to be taken into consideration when accumulating wealth and taking advantage of the tax benefits provided.
And finally, ultimately it is your superannuation investment strategy that will have a greater influence on your actual financial outcome in retirement, and so spending time pro-actively researching, strategising, discussing and managing your superannuation investment capital will be time well spent.