As we reach the final stages of the election campaign, there have been two interesting announcements, one from each side of Government regarding the proposed superannuation changes.
Firstly, over the weekend, Labor has unveiled in their final costings the inclusion all of the Coalition Government’s proposed superannuation changes, without actually committing to adopting the policies, banking approximately $3 billion in savings measures.
Also, we saw the Federal Treasurer, Scott Morrison acknowledge that the Government will provide a ‘carve-out’ with the $500,000 lifetime cap for non-concessional contributions, in particular focusing on the unintended consequences of those who have contractual commitments in place prior to budget night. Importantly, any NCC amounts will not be allowed to be greater than the existing contribution cap framework that currently exists (e.g. member under 65, can utilise bring forward to $540k). This is also likely to apply to limited recourse borrowing arrangements that need to comply with the ATO’s safe harbours in PCG 2016/5.
The Treasurer has made clear that the intent of introducing a lifetime NCC cap isn’t changing, but rather he has conceded that the Government needs to accommodate those impacted by the immediate impact of the rules from 7.30pm on 3 May 2016.
The decision by Labor is an interesting one, effectively acknowledging the need for further changes beyond the two measures announced in their ‘100 positive policies‘ – being, a reduction in the Div 293 threshold to $250,000 and the limitation of a fund’s tax exemption to a pension member’s earnings up to $75,000 p.a.
The real challenge begins the day after the election when a newly formed Government begins the process of moving to introduce these changes. Subject to the makeup of a newly elected Government, we could then move into a stage of significant lobbying as these measures move to become law. Therefore, we may still be some time aware from having any level of certainty on issues like the lifetime cap on non-concessional contributions.
The reality is whatever side of Government is elected, the proposed superannuation changes are almost certainly coming… start to plan for it now!