In the recently announced Budget for 2016-17 (which we wrote a blog post on here), the government included changes to the cap on Non-concessional Super Contributions (NCCs). In particular, we are referring to the reduction of the cap to just $500,000 over the lifetime of the fund. These contributions will be measured from 1st July 2007. This change could significantly affect trustees who have gone about the management of their super fund in a completely lawful manner if they are passed – especially if the total Non-concessional Super Contributions they have already made over the last 9 years almost meets or exceeds the prospective cap which is significantly lower than caps imposed under previous budgets.

Despite the announcement of these changes, it is important to keep a clear head and keep looking to the future. It is important to understand that these changes have not been made law and they cannot be passed until after June 30th 2016. This is why we recommend that if you had plans to make NCCs before the end of the financial year that will cause your fund to breach this limit, that you go ahead and do so anyway.

Why shouldn’t you worry about the $500k cap on Non-concessional Super Contributions?

  1. The government has not given us any certainty about these changes as they have not pushed the budget measures through parliament before they called a Double Dissolution.  This means non of the changes announced in the budget are law and now they can’t be until after the 30th June.
  2. The government would need to be re-elected for the changes to be passed. Labour have promised that if they are elected, the NCCs cap they impose will not apply retrospectively.
  3. It is part of your responsibility as a trustee looking to maximise the amount in Super for your members. You need to ask yourself “am I doing the right thing by not doing anything, not making any contributions when there may be no chance to make up for them after the 30th June election (because you are over 65 and have stopped working for example).
  4. If the Coalition is voted back in, the prospective changes would still have to pass through the new lower and upper house, where there is a good possibility that a new figure will be negotiated that is higher than $500,00. It is possible that something more reasonable, like a $1 million lifetime NCC limit may be the result.
  5. Given all of the uncertainty, it is unlikely that their will be any penalty if the measures are made law and the money has to be taken out of the fund so that NCCs no longer exceed the new cap.
  6. The old rule of getting things done – it is better to ask forgiveness after the deed is done than to seek permission beforehand – comes strongly to mind.

As always though, if you are unsure about what to do with your own Self-Managed Super Fund, you should consult with your financial planner who will help you through on a case-by-case basis.

Give us a call on (07) 5598 3800 today

Non-concessional Super Contributions