As reported last week, several revisions were announced to the superannuation proposals, the most significant being:
• The replacement of the $500,000 non-concessional lifetime cap with an annual allowance of $100,000, reduced from $180,000 a year;
• The introduction of restrictions on non-concessional caps when a balance of $1.6 million is reached; and
• Non-concessional contributions will be allowed up until the age of 74, increased from 65. Additionally, working individuals will be able to make concessional contributions until the age of 74 and non-working individuals until age 65.
With a more concrete view of what the superannuation system will look like in the future, Rice Warner said it is clear who will benefit or be disadvantaged from the proposals.
“Younger superannuants or those with smaller balances wishing to accumulate significant tax-concessional retirement savings will find it easier now to reach the $1.6 million cap for pension accounts. Given the reduced cap on concessional contributions [of] $25,000 a year, there will be an increased importance of non-concessional contributions in augmenting balances,” Rice Warner said in a statement.
“Members who have already made more than $500,000 in non-concessional contributions since 2007 but have less than $1.6 million in their superannuation account will also be better off. They can continue to make post-tax contributions to their superannuation account.”
With changes affecting those with large balances tightened, the losers will be wealthier Australians.
Members with balances exceeding $1.6 million will be unable to make non-concessional contributions, while those who have retired and are older than 65 will not be able to make concessional contributions out of investment earnings.
“The government was going to allow those over 65 to make non-concessional contributions as long as they remained below the lifetime limit of $500,000. This has now been restricted to those who are still working between 65 and 74, [although] the definition of ‘working’ has a low bar – you only need 40 hours within a 30-day period once a year,” Rice Warner said.
However, despite these revisions, Rice Warner said only a minority of Australians will be affected.
“Overall, these groups represent only a small fraction of the superannuation population. For the majority of members, interaction with super will be business as usual and they will wonder what the fuss is all about.”