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Government scraps lifetime super cap

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Simon Hampel, 16th Sep, 2016.

  1. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    http://www.theaustralian.com.au/nat...p/news-story/58f331bc6f043735d30d64e2b0a46e52

     
  2. Heinz57

    Heinz57 New Member

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    Any noise on the reduction of the concessional annual cap from to 25k? I heard there may be a catch up provision.
     
  3. austing

    austing Well-Known Member

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    $25K concessional cap is not being changed and catch up provision delayed until 1 July 2018.

    Biggest opportunity now is that it looks like one can still take advantage of the 3 year bring forward rule under the old rules to make a non-concessional Contibution of $540K prior to 1 July 2017 when the new legislation commences. That is, if haven't already done so like us in the last 3 years:(. Under the new proposed legislation the 3 year rule stays but there's a $100K NCC annual limit so $300K for 3 year rule provided your total Super balance is less than $1.6 Mil.

    It's looking strongly likely now these changes will supported by Labor and legislated.

    Government cracks under pressure on super reforms - TheDunnThing

    Request Rejected (Gov't media release, link works)
     
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  4. hobo

    hobo Moderator Staff Member

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    @Gordon Austin

    One thing that's not clear to me is how the $1.6m cap works with market fluctuations. I did read one suggested explanation soon after the Budget was initially released, but I've not seen much commentary/discussion since.

    e.g. Someone has $1.5m in super (accumulation mode) when the $1.6m cap is brought in. Then the market tanks and their balance drops to, say, $1.2m. Can they then (assuming the NCC cap is $100kpa and the Bring Forward Rule is available to them at the time) just dump $300k into super to get back to /just under the $1.6m cap?

    The explanation I read was talking about percentage of cap and restrictions along those lines....?
     
  5. austing

    austing Well-Known Member

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    The experts are already looking at how best to deal with the updated changes.

    I've been away on a break so haven't had a chance to really get into the new changes. So please check my following comments for accuracy.

    But as I understand it once you commence a pension on 1 July 2017 that amount stays fixed. So if you commenced a pension with the maximum $1.6 Mil and the market crashes the next day reducing your balance to $1 Mil you can't top it back up to $1.6 Mil. In your above example you could only top up the initial $1.5 Mil "commencement" value with $100K regardless of what has happened to the value of your super balance since the starting date.

    I'm hoping for a market crash just prior to 1 July 2017 to get as much of my existing pension into the new limited pension.
     
  6. hobo

    hobo Moderator Staff Member

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    Thanks @austing, that makes sense.

    I realised after I wrote that, as well, that I was conflating pension mode and accumulation mode. Obviously I needed more coffee. :rolleyes:
     
  7. austing

    austing Well-Known Member

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    It appears with the revised changes there might be opportunity to top up if one's super balance falls below $1.6 Mil. Check out my latest post. So my above post based on the first round of changes appears to be now incorrect:

    Navigating the government’s revised contribution proposals

    Talk about making Super more complex!