Super changes made simple.

On the eve of the last election the Government announced a raft of changes to Superannuation that they wanted introduced. Obviously, only after the Election was run and won could they proceed with implementing them.

There was much consternation at the time and during our recent series of Election Update workshops we outlined what these changes meant to you. As we pointed out, the Election result would have a bearing on how the proposed changes played out and whether or not there would be any appetite to have them passed.

Now, after extensive consultation, the Government have released their amended superannuation package. Once again though, we will have to wait and see whether they can garner the necessary support to have the proposals implemented.

Here is a summary of the original proposals and the newly announced amendments.

Original budget announcement

$500,000 lifetime cap on non-concessional contributions to apply from 3 May 2016, and inclusive of non-concessional contributions made since 1 July 2007.

Proposed amendment

The lifetime cap is to be scrapped. It will be replaced with a $100,000 annual cap on non-concessional contributions, with the ability for those under 65 to bring forward up to three years of contributions. Non-concessional contributions will only be available to people with less than $1.6M (indexed) in superannuation.

This measure is to take effect from 1 July 2017.

Original budget announcement

Removal of the work test – thereby enabling people aged between 65 and 74 to make superannuation contributions without having to be gainfully employed for a minimum period of 40 hours within a 30-day consecutive period.
Projected to apply from 1 July 2017.

Proposed amendment

This measure will not be continuing.
Consequently individuals wishing to make superannuation contributions between the ages of 65 and 74 will need to meet the work test, which currently applies.

Original budget announcement

A concessional contribution catch-up would allow people with less than $500,000 in superannuation to carry forward any unused portion of their concessional contribution cap for a period of up to five years.
Projected to apply from 1 July 2017.

Proposed amendment

This measure will continue, however, its implementation will be deferred by one year and is now proposed to take effect from 1 July 2018.

These combinations of changes bring an important issue out into the open. Clearly, it’s now no longer a simple exercise to make large lump sum contributions to Super with the intention of buying income producing assets, either with finance or without.

There are, or will be, limitations in place when the amendments are passed that make strategic planning far more important. Now more than ever it’s vital to seek guidance on what your situation is and how it aligns with your intentions. Planning for a future purchase becomes critical if funds need to be injected into Super and it’s deemed to be outside the rules.

Some people may fall into the trap of waiting until there are sufficient funds available in their Super rather than take action now to make sure they are ready.

One thing that is quite clear is that these constant changes to Superannuation rules require intimate knowledge of what can and can’t be done. If there is one thing you take away from all of this it should be that it’s imperative to seek the services of a Financial Planner to help you navigate through the changes. Keep in mind that seeing a Planner once is not enough, the best Planners provide ongoing proactive service to keep you on track so you can steer a course to the future you want.




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