With many of the changes announced in the 2016 Federal Budget now passed by Parliament, there is an amount of certainty that you can have when approaching your SMSF planning and the contributions you might wish to make to your SMSF.
The Government is lowering both the concessional (pre-tax) and non-concessional (after-tax) contribution limits from 1 July 2017.
One of the original proposed measures which received a lot of comment and caused concern was the $500,000 lifetime non- concessional contributions (after-tax contributions) limit. This proposed measure was dropped and replaced with a $100,000 annual limit on after-tax contributions from 1 July, 2017.
Pre-tax contributions will be limited to $25,000 for all taxpayers from 1 July 2017.
Below is a general overall summary of the changes for both concessional and non-concessional contributions.
After- tax contributions / Non-Concessional Contributions
- The $500,000 lifetime limit has been dropped in favour of a $100,000 annual cap. The rules allow the opportunity to bring forward three years of contributions if you are under age 65 – making it possible to contribute up to $300,000 in one year.
- For the 2016/17 year, it is still possible to make a contribution of up to $180,000 for one year, or if you are under age 65 to bring forward three years’ contributions – so you are able to make a contribution of up to $540,000 (if you haven’t triggered the bring forward in the previous two years). If you do not use this full limit of $180,000 or $540,000 in the 2016/17 year, then you will be limited to the $100,000 annual and $300,000 bring forward caps for future years.
- Where the bring forward of contributions has been triggered before 1 July 2017, transitional contribution caps may apply.
- If you have a balance of $1.6m or more in your SMSF at 1/7/2017 then you will not be able to make further after-tax/non-concessional contributions.
- When approaching the $1.6m cap care will need to be taken with the bring forward rules as these are restricted by the new $1.6 million balance restriction.
Pre-tax contributions / Concessional Contributions:
- The concessional contributions cap is lowered to $25,000 per year for all taxpayers from 1 July 2017.
- Taxpayers who were aged 49 or over on 30 June 2016 can make up to $35,000 in pre-tax contributions in 2016/17.
- Those aged under 49 on 30 June 2016 can make up to 30,000 in pre-tax contributions in 2016/17.
Some of these changes may require you to adjust your contribution strategies going forward.
This will most likely be the case if you have a superannuation balance of over or close to $1.6 million or were planning on making significant contributions to superannuation in the next few years.
However, there are additional rules to comply with for example the maximum contributions are still dependant on additional aged based rules, work test rules and whether or not you may have triggered the bring forward in prior years. Please also keep in mind that the contribution rules apply to all contributions to all superannuation funds for a particular member. Please speak to your Client Director to review how these rules apply to your individual circumstances.
How can we help?
If you are concerned that the Government’s changes to contributions for superannuation are going to affect you, please feel free to contact our SMSF experts and arrange a time to meet, so that we can discuss your particular requirements in more detail.