In a major reversal of an ‘iron-clad’ election policy to support the super changes in the 2016 Federal Budget, the Treasurer yesterday announced the lifetime cap would now be dumped.
After intensive lobbying by government backbenchers, perhaps the most controversial of the changes, the $500,000 lifetime non-concessional cap is out, replaced by a reduction in the annual cap from $180,000 to $100,000. Those under 65 will still be able to use the ‘bring forward’ rule to make three-years’ worth of non-concessional contributions in one financial year. Whilst this is ‘typically less than $200,000’ it can be up to $325,000 until the limit of $1.6 million is reached.
From 1 July 2017, anyone with a superannuation balance over $1.6 million will no longer be able to make non-concessional contributions to super – a limit that will henceforth be indexed to the balance transfer cap.
It is estimated that only around one per cent of superannuants actually reach the $1.6 million transfer cap. By replacing the lifetime non-concessional cap with the reduced annual cap, the Government will forgo around $400 million in savings over the forward estimate period so, to make up this shortfall, the Government will no longer proceed with the harmonisation of contribution rules for those aged 65 to 74.
This may be considered a blow to older Australians trying to boost their superannuation savings, as the proposal to remove the restrictions on 65 to 74 year olds making voluntary contributions has been scrapped to fund the changes to the lifetime non-concessional cap.
Put simply, if you wish to continue to contribute to super after age 65, you will need to be in the workforce. This will obviously make things difficult for those unable to work for reasons of health, discrimination or those working in ‘sunset’ industries such as manufacturing.
Catch-up concessional superannuation contributions will be deferred until 1 July 2018 to ensure the full cost of changes to non-concessional contribution arrangements are met over both the forward estimates and the medium term.
Mr Morrison described the changes as ‘fairer, more flexible and sustainable’ and said that he expected this revision would receive Opposition support. “It removes every impediment that Labor mentioned,” he said.
Shadow Treasurer Chris Bowen claims that the Government had backflipped on the ‘iron-clad’ policy it took to Election 2016 and that Labor would not simply wave it through, adding that his party would take time to fully scrutinise the package before giving it the option to pass.
What do you think of these changes? Is the Government satisfying the needs of the wealthy over the needs of the rest of us? Or do you think they are fair changes?