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While the new proposals regarding non-concessional contribution caps is a welcome advancement from the $500,000 lifetime cap, there are still a number of issues requiring clarification, says an industry lawyer.
The government announced last week that it has decided to drop the $500,000 lifetime cap and instead implement an annual non-concessional cap of $100,000 per financial year from 1 July 2017.
DBA Lawyers director Daniel Butler said the government has mentioned there will be transitional arrangements for those individuals who have ‘not fully used their non-concessional bring forward before 1 July 2017’ but it is not clear if there will be a reassessment of their remaining bring forward amount to reflect the new annual caps.
He also noted that it appears that a member can make additional NCCs if their superannuation balance falls below $1.6 million in subsequent years even if they have previously full utilised their $1.6 million, although this also remains unclear.
The government noted in its fact sheets that the $1.6 million eligibility threshold will be based on an individual’s balance as at 30 June the previous year.
Mr Butler also said the government hasn’t indicated if there will be any carve outs with the $1.6 million cap.
“Presumably, carve outs will still need to be provided for the revised NCCs cap,” said Mr Butler.
Carve outs may still be required he said for pre-budget contracts entered into by superannuation funds before the original budget announcements, personal injury settlement moneys and the CGT cap amount.
“The revised NCCs cap is a welcome development. Many people will have to adjust their planning, and are best positioned to do so if they monitor and keep on top of the changes,” he said.