partners for life
Surprising Cap Change On After-Tax Super Contributions
While many expected certain amendments in the current after-tax (non-concessional) contribution to super with the new Federal Budget, many were taken by surprise when Treasurer Scott Morrison introduced a lifetime cap of $500,000 on after-tax contributions in the 2016-2017 Budget.
“We have long advocated for a lifetime rather than annual limit for non-concessional contributions. What we hadn’t predicted, however, was the Government would make the limit relatively low…” said an article from Heffron SMSF Solutions’ blog.
Although this change is still subject to legislation and the Coalition winning the 2016 Federal Elections, super contributors were even more shocked when it was announced that this cap takes into account all non-concessional contributions made on or after 1 July 2007.
This new regulation in non-concessional cap is devastating to super members who were planning to contribute a significant amount to their super. That’s because, in the 2014-2015 budget, individuals can contribute up to $180,000 in a year, while individuals below 65 years old can bank in three years’ worth of after-tax contributions in a year, allowing the non-concessional contributions to reach $540,000 in the first year, and no contribution the following two years.
If, however, the after-tax contributions have exceeded $500,000 before 3 May 2016, the contributor will not be liable for any penalties or taxes. However, if non-concessional contributions exceed the new cap after the 2016-2017 Federal Budget was handed down, these contributions must be removed or it will be taxed 47% on after-tax funds.
Thinking about becoming a client?
Book your free, no obligation consultation right now via our online booking system or get in touch to find out more
Already a client and want to get in touch?
Send us an email via our enquiry form or give us a call today