CAANZ is “particularly concerned” by the $500,000 lifetime cap on non-concessional contributions.
“The $500,000 threshold is too low. This unfairly impacts those who had been preparing – in many cases for many years – to use the current rules and now find themselves disadvantaged because access has been blocked,” the accounting body said.
In particular, this cap could adversely affect the planning of those who have super funds that had signed a contract of sale to purchase a property that settles after 3 May and the members were intending to make NCCs to complete the sale, CAANZ said.
Further, older Australians who have not contributed to super are now limited to superannuation accounts of $500,000. Withdrawals of five per cent from age 65 mean that their pension could be restricted to $25,000 per annum.
In addition, the new cap limits the amount of money Australians who have worked overseas can transfer back to Australia from foreign super funds, CAANZ said.
“A higher lifetime limit should be introduced for those aged at least 50 years of age before July 2016,” CAANZ said.
“In addition, the start date of this measure should not apply for contributions made since 1 July 2007. We have a number of practical difficulties with counting contributions from about nine years ago. It is heroic to assume that investors will be easily able to access accurate contributions data of their past NCCs so they don’t fall foul of this new rule.
“Clearly a revised start date has to be put in place for this measure. Given many of the government’s proposed super changes commence on 1 July 2017 then consideration should be given to applying this date.
“The government also needs to confirm that contributions made from structured settlements or personal injury claims are exempt from this change.”
In addition, the $1.6 million limit on pension account balances will have a significant impact on the retirement planning of clients, CAANZ suggested.
Examples of situations requiring “urgent attention” include:
– Who will make the assessment about whether investor’s pensions are within or exceed the $1.6 million? How and when will super funds forward this information? At what transaction date will the assessment be done?
– If, or how and when, death benefit pensions will be assessed under the $1.6 million limit.
– The movement of pensions from one product to another, especially if the original pension has declined due to severe market turbulence. Will there be a reassessment?
– Ceasing market linked and complying pensions that have an account balance greater than the $1.6 million limit.
– Interaction between unfunded defined benefit pensions that pay less than $100,000 and private pensions.
– Amounts from structured settlements and personal injury claims greater than $1.6 million.