The Treasurer handed down the 2016/17 Federal Budget at 7.30 pm on Tuesday 3 May 2016.
The Budget introduces a series of dramatic changes to the concessional tax status of superannuation.
In this series of Blog posts we will take a look at some of the key changes introduced.
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A lifetime $500,000 non-concessional contributions cap will be introduced from Budget night.
The current system of annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65), will be replaced with this new lifetime cap.
The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007 and will commence at 7.30 pm (AEST) on 3 May 2016. Contributions made before commencement will not result in an excess. However, excess contributions made after commencement will need to be removed or will be subject to penalty tax. The cap will be indexed to average weekly ordinary time earnings.
After-tax contributions made into defined benefit accounts and constitutionally protected funds will be included in an individual’s lifetime non-concessional cap. If a member of a defined benefit fund exceeds their lifetime cap, on-going contributions to the defined benefit account can continue but the member will be required to remove, on an annual basis, an equivalent amount (including proxy earnings) from any accumulation account they hold. The amount that could be removed from any accumulation accounts will be limited to the amount of non-concessional contributions made into those accounts since 1 July 2007. Contributions made to a defined benefit account will not be required to be removed.
The lifetime cap is available up to age 74.
Proposed date of effect: 7.30 pm (AEST) on 3 May 2016 and applies to all non-concessional contributions made on or after 1 July 2007.