Superannuation fund members who previously relied on the annual non-concessional contributions cap (NCC) of $180,000 may now have no or little lifetime NCC cap left remaining, according to DBA Lawyers.
This comes off the back of the proposal of the $500,000 lifetime NCC made in the Budget last week.
An analysis by DBA Lawyers director, Daniel Butler, and special counsel, Rebecca James, said as the current legislation was implemented on 1 July 2007 and if NCCs were made during the nine years and did not exceed $500,000, then there may be some remaining cap.
“If someone makes an NCC after the Budget announcement at 7.30pm on 3 May 2016, including any NCCs made in the prior nine year period that exceeds $500,000, then their super fund must either reject any excess amount or the excess will be taxed at 49 per cent if the member leaves the excess in their super account if possible,” the analysis said.
“There is doubt as to whether the announcement will allow the excess to remain in the superannuation fund given the little detail on this announced change.”
The analysis said the recent limits on making NCCs were:
- NCCs prior to 7.30 pm 9 May 2006 — unlimited;
- NCCs from 9 May 2006 to 30 June 2007 — $1 million;
- NCC from 1 July 2007 to 7.30 pm 3 May 2016 — $180,000 (indexed figure) per financial year or $540,000 averaged over three consecutive financial years where the member was under age 65 and was eligible to apply the bring forward rule in s 295-85(3) of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997′); and
- NCCs from 1 July 2007 to 7.30pm 3 May 2016 — $500,000 as reduced by any NCCs made from 1 July 2007.
“Given the far more generous contribution caps applying before 4 May 2016, the $500,000 lifetime cap is a retrospective and an unfair change of law made by way of Budget announcement especially as it may not survive the political and legal process that lies ahead,” it said.
They said the cap did not allow any flexibility for the numerous investment timing and life cycle risks that could arise.
“Being prospective, if the limit is $500,000 then most people will hopefully adjust and learn to live with this new limit. However, to then seek to impose a retrospective nine year inclusion period on prior contributions when people have gone about their affairs in an ordinary and lawful manner is unreasonable and should not be tolerated by our community,” Butler and James said.
“Indeed, the current Government has misrepresented that there will be no adverse super changes. A change of Prime Minister in September 2015 is no excuse for such poor law making.”
