The New Contribution Caps

From 1 July 2017 the new contributions caps will be $25,000 per financial year for concessional contributions and $100,000 per financial year for non-concessional contributions.  Concessional contributions are contributions which can be claimed as a tax deduction while non-concessional contributions are contributions which cannot be claimed as a tax deduction.  

The $25,000 annual cap will be indexed by reference to the AWOTE index (average weekly ordinary times earnings) and adjusted in increments of $2,500.  The non-concessional contributions cap annual cap is specified to be four times the concessional contribution cap.  Consequently, the non-concessional contributions cap will increase by increments of $10,000 each time the concessional contribution cap increases.
In respect of the 2016/17 financial year the respective annual caps were $30,000 (or $35,000 if aged 50 or more at any time during the 2016/17 financial year) for concessional contributions and $180,000 for non-concessional contributions.

From 1 July 2017, a new precondition for making non-concessional contributions will be imposed: namely, that the member’s total superannuation balance be less than $1.6m immediately before the start of the financial year in which the contribution is to be made.  The total superannuation balance is, effectively, the total value of your superannuation interests – whether in pension phase or in accumulation phase.  Technically, it is the accumulation value of your superannuation interests which are not in pension phase, the value of your transfer balance account (if positive) and the value of any superannuation interests which are being rolled over  - ie have left one fund but which have not been received by the other fund.  For the 2017/18 financial year, the total superannuation balance will be determined immediately after the commencement of that financial year.  For all subsequent financial years, it will be determined immediately before the commencement of the relevant financial year.

Importantly, the value of any personal injury contributions are deducted from the total superannuation balance.  However, the value of any CGT non-concessional contributions are not deducted.  The significance of the deducting of the former but not the latter is considered later in this issue.

In summary for the 2017/18 financial year:

• Concessional contributions cap - $25,000 (for all ages);
• Non-concessional contributions cap - $100,000 (but only if your total superannuation balance is less than $1.6m);
• Bring-forward cap - $300,000 (if your total superannuation balance is less than $1.4m) or $200,000 (if your total superannuation balance is $1.4m or more and less than $1.5m);
• Personal injury contributions – there is no cap;
• CGT non-concessional contributions – indexed value for 2017/18 not yet released – but value for 2016/17 was $1,415,000 – this is a lifetime cap and not an annual cap.