REMOVED: $500,000 lifetime Non Concessional Contributions (NCC) Cap
Arguably the most controversial super reform in the 2016 budget, the proposed $500,000 lifetime NCC has been dropped. With the initial proposal gaining strong opposition from both the Labour party and the public alike, it is unlikely this reform will be brought to parliament in the near future.
REVISED: Annual Non-Concessional Cap
Not wanting to be complaisant, the government has announced a reduction to the current annual NCC Cap from $180,000 to $100,000, effective from 1 July 2017. This will mean you can continue to contribute NCCs of up to $180,000, and use the bring forward to $540,000 for the 2017 financial year. The 3-year bring forward provisions will remain as per the current provisions based on the lower cap ($100,000). However, no NCC contributions will be allowed once the proposed $1.6Million transfer cap has been reached.
AS PROPOSED: Division 293 Threshold
The Division 293 income threshold will be lowered from $300,000 to $250,000 effective from 1 July 2017. The lower threshold will mean more of the high-income earning individuals are captured in the division 293 tax.
AS PROPOSED: Annual Concessional Contribution (CC) Cap
The proposal to reduce the current CC Cap ($30,000 for under age 50 and $35,000 for age 50 and over) to $25,000 for all ages will remain and commence from 1 July 2017.
However, the ability to catch-up on up to 5 years of unused annual CC cap has been postponed until the 2019/2020 financial year.
REVISED: CC and NCC eligibility tests for individuals aged between 65 and 75
The government has changed their mind on the removal of the work test for those aged over 65. This means, all persons aged between 65 and 75 will have to continue to meet the work test (i.e. work over 40 hours within a 30-day period each income year) to be able to make annual NCC. Those who do meet the work test will also be able to claim a tax deduction for personal contributions up to the CC Cap.
Summary
Although the Labour Party have previously welcomed most of the super reforms proposed by the government, we expect the changes and refinement will be made to the above as it is challenged and debated through parliament. If you would like to further discuss the above and how it applies to you, please contact your Altitude Adviser.