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Contributions caps and taxation of contributions

Non-concessional cap

Section: 5.4

The standard non-concessional contribution cap is shown in the table below.

Standard non-concessional contributions cap for 2017-18 Total superannuation balance on 30 June 2017
$100,000 less than $1.6 million
Nil $1.6 million or more

Subject to the client' total superannuation balance, a higher non-concessional contributions cap in 2017-18 may be available for:

  • a client who is under the age of 65 at any time in the financial year, using the standard bring-forward rule, (section 4.2) or
  • a client who triggered the transitional bring-forward rule in 2015-16 or 2016-17.

The standard non-concessional cap is set at four times the concessional contributions cap which is indexed to Average Weekly Ordinary Time Earnings (AWOTE) in increments of $2,500. Therefore the standard non-concessional contributions cap will increase in line with increases in the concessional contributions cap, in increments of $10,000.

2017 Federal Budget proposal: Contributing proceeds from sale of home: Effective 1 July 2018

Individuals aged 65 and over will be able to contribute up to $300,000 into super from the proceeds of the sale of their principal place of residence. This measure will apply to a principal place of residence held for a minimum of 10 years.

These contributions will be treated as non-concessional contributions and will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps.

The existing contribution restrictions for people over age 65 and the restrictions on making non-concessional contributions where a person's total superannuation balance is over $1.6M will not apply. However, these contributions will not be exempt from the transfer balance cap and will only be able to be used to commence a retirement phase income stream where the member has remaining transfer balance cap space. The amount contributed will also be fully assessable under the Age Pension assets test and generally deemed under the income test.

While this proposal could allow an eligible couple to contribute up to an additional $600,000 to super over and above their existing concessional and non-concessional caps, it is likely to be more attractive for clients who are income tested or who are not receiving a means tested pension. For assets tested part pensioners, they would need to earn an after tax return of at least 7.8% on the amount contributed to break even.

At the time of writing this proposal is not yet law.

Last modified: Wednesday, January 10, 2018