The Federal Government has dumped the controversial superannuation $500,000 lifetime non-concessional contribution cap and replaced it with an annual limit of $100,000. An individual under 65 can continue to ‘bring forward’ three years’ non-concessional contributions. In addition, an individual with a super balance of more than $1.6 million will no longer be eligible to make non-concessional contributions. It is expected all these change will commence from 1 July 2017. To compensate for the budget hit, the following changes were also made to the May 2016 Federal Budget proposals: The removal of ‘work test’ requirement for a member between 65 and 75 will not proceed The proposed catch-up concessional contribution for a member with a superannuation balance less than $500,000 will be deferred by 12 months to 1 July 2018. For the current financial year, an individual’s annual non-concessional contribution cap remains at $180,000. For those aged 64 or under on 1 July 2016, they will be able to bring forward three years’ non-concessional contributions in the 2017 year, i.e $540,000 (to the extent it hasn’t already been used). These changes mean there may be opportunities for those who: Are turning 65 in the 2017 year or shortly after; or Already have more than $1.6 million in their super balance, but still wish and are eligible to contribute and build up their super balance; or Want to maximise their non-concessional contributions in the 2017 year to contribute up to $540,000 in the 2017 year. Unresolved matters The Treasurer Scott Morrison previously issued a clarification on the scope of the $500,000 lifetime limit on non-concessional contributions. In particular, there were two exceptions proposed relating to pre-existing contracts and existing borrowings. It is unclear how the abandonment of the $500,000 lifetime non-concessional contribution cap will impact on these proposed exceptions. For pre-existing contracts, it is unclear when the completion of pre-existing contract is to occur post 1 July 2017, if an exception will apply to the $100,000 non-concessional contribution cap and/or the ability to make further non-concessional contributions if the individual’s superannuation benefit already exceeds $1.6 million. For self-managed super funds (SMSF) with existing borrowings, including limited recourse borrowing arrangements (LRBA), it is unclear if the members are able to contribute further non-concessional contributions prior to 31 January 2017 (or 1 July 2017 perhaps) to comply with the ATO’s Practice Compliance Guideline 2016/5 (PCG 2016/5). For example, for a member who has already maximised their non-concessional contributions (contributed $540,000 in 2015 or 2016 year), whether they are able to make further non-concessional contributions prior to 31 January 2017 to enable the SMSF to pay down the loans. In addition, it is unclear if exceptions previously considered under $500,000 lifetime non-concessional contribution cap will be provided under the new non-concessional contribution cap proposals, such as divorce, foreign superannuation fund transfers, fraud, CGT and personal injury settlement contributions. Another unresolved matter is when an individual has acted under the proposed $500,000 lifetime non-concessional contribution cap post the May 2016 Federal Budget, will they be provided any excess contribution concessions. For example, if the individual had contributed more than they would be able to contribute under the current $180,000/$540,000 rules, and as a consequence, the individual now has excess non-concessional contributions in the 2016 or 2017 year, will the excess non-concessional contribution penalties be relaxed in these situations? The removal of the $500,000 lifetime non-concessional contribution cap backdated to 1 July 2007 is a positive change and provides for some greater certainty in relation to an individual’s ability to make personal contributions. The other May 2016 Federal Budget proposals on superannuation remain the same, including maximum $1.6 million that can be transferred into or retained in pension phase on 1 July 2017, the reduction of concessional contribution cap to $25,000 from 1 July 2017, the reduction of Division 293 tax threshold from $300,000 to $250,000 from 1 July 2017, the improved access to concessional contributions by removing the ‘substantially self-employed test’ (the 10% rule) and the removal of various tax concessions applicable to Transition to Retirement Income Streams. The Government had already released exposure draft legislation for public consultation on 7 September 2016 for some super changes announced in the May 2016 Federal Budget. Comments on this proposed legislation were due today (16 September). It is hoped that the legislation for the rest of the announced changes will be introduced before the end of the year. Once legislated, most measures will take effect from 1 July 2017.