After the backlash that occurred following the Federal Government’s proposed changes to Superannuation in the last Budget (and which they took to the last election), today the Treasurer has announced some changes that they have managed to negotiate so that the superannuation legislation can get through parliament.
Remove of retrospective legislation relating to a lifetime cap on contributions.
Perhaps the government ‘saw the light’ and realised that having a cap on contributions that went back to 2007 was actually retrospective (even though they argued that it was not), or maybe they worked out that the ATO simply didn’t have the manpower or systems to calculate the required information, but either way, it doesn’t matter. What they have announced today is that there will be no retrospective cap on contributions.
Rather, the annual cap will be set at $100,000 (previously $180,000), and the amount that anyone has contributed since 2007 is irrelevant. They are however proposing that you can only contribute these amounts until such time as you have a superannuation balance of $1.6 million (i.e. once you’re over that your annual limit is therefore $0).
Whilst still not ideal (i.e. it’d be better if the $1.6m cap didn’t exist), I would say that overall, given the need for budget savings, I think this is a fair compromise. I hope you do too.
Remove of proposed ability for people aged 65-74 to contribute to super without meeting a ‘work test’
As I’d mentioned in my initial commentary on the 2016 budget, this was (in my mind) a strange proposal – given that the budget was all about raising revenue & limiting the ‘abuse’ of super, why would they allow people to contribute for longer? Anyway, it doesn’t matter anymore as this proposal has now gone the way of the Dodo.
Deferral of the ability to catch up concessional (pre-tax, i.e. employer or salary sacrifice) contributions
The next casualty of these latest changes is that the ability to make ‘catch up’ contributions to super will not begin until 1/7/18 (previously proposed to be 1/7/17).
Whilst disappointing that this is being deferred, it is good that it hasn’t been scrapped altogether.
This catch-up proposal will be especially helpful to people in & out of the workforce for instance, or people returning from maternity leave.
Obviously these changes (and others previously proposed that are not yet law) will still need to get through parliament, but it sounds like the Labor party is onside with the Liberal proposals, and we can all hopefully move forward with some certainty.