More tinkering with our Retirement

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More tinkering with our Retirement                                         

As you may recall a number of superannuation changes were announced in the May Federal Budget. These announcements were extremely unpopular with both parties. So, in September the Treasurer thought he would have another attempt at proposing some superannuation changes. Below I attempt to highlight some of these changes.

The $500,000 non-concessional lifetime contributions cap has been abandoned and instead the previous $180,000 yearly non-concessional contribution threshold has been reduced to $100,000 per annum. Thus if you are under age 65 and can still utilise the three year bring forward provision, it has now reduced from $540,000 to $300,000. Of course there are transitional rules; to ensure complexity prevails, but I don’t have enough space here to detail those.

The good news is that the above changes (if legislated) won’t take effect until 1 July 2017, so if you have the cash available before June 30 & you’re under age 65, you can still take advantage of the full $540,000 three year bring forward provision, if you haven’t triggered it already. If you haven’t got the full $540,000 but more than $180,000 then you can trigger the transitional arrangement which means your total cap might be more than the $300,000 that becomes effective next year. If that sounds a bit confusing, that’s because it is.

The work test for those over age 65 & wishing to contribute to super will now remain; this has scuttled a few plans for those who got excited back in May.

The $1.6 million transfer balance cap, which is the amount you can transfer from the accumulation to pension phase at retirement, also remains.

Another new idea is the $1.6 million eligibility cap. This is different to the transfer balance cap above; it’s confusing because of the $1.6 million amount. This means that if your super fund balance is over $1.6 million you won’t be able to make any more non-concessional contributions, no matter your age. There are also rules that apply as you approach the cap, which may restrict contributions.

The ability to catch up concessional contributions remains, but its introduction will be delayed until 2019-20.

 

Evan Grespos – Financial Adviser – Aspire SRS