Government drops $500,000 lifetime non-concessional super contributions cap
Superannuation | 15/09/2016 |
2 min read
The Federal Treasurer, Scott Morrison, has announced changes to proposed superannuation legislation that include dropping the controversial $500,000 lifetime cap on non-concessional (after-tax) super contributions.
Dropping the lifetime cap proposal will cost the federal budget around $400 million over forward estimates, but the Treasurer said the government had been able to contain the cost of dropping the measure by:
- a substantial reduction in the annual non-concessional contributions cap from $180,000 to $100,000; and
- from 1 July 2017, prohibit non-concessional contributions for people whose superannuation balance is $1.6 million or more;
- dropping the proposal to remove the work test for people aged 65 to 74 who wanted to continue contributions beyond age 65.
The Government's new legislation will also defer the introduction of 'catch-up' concessional (pre-tax) employer contributions to 1 July 2018 to ensure the full cost of the non-concessional contributions arrangements are met. The catch-up provision will allow people taking a break from work with greater flexibility to add make additional salary sacrifice contributions over several years to top-up foregone employer contributions.
"These measures will ensure 96% of Australians remain better off or unaffected by our superannuation reforms," Mr Morrison said.
Key superannuation industry groups, ASFA and AIST, have generally supported the proposed changes, with Industry Funds Australia's David Whiteley, saying the policy was a 'workable compromise' and the Association of Australian Superannuation Funds urging parliament to get on with passing the legislation.
The superannuation changes are subject to passing through both houses of parliament, with the government believing today's announcements should make their passage more likely.