Understanding the amendments to the Non-Concessional Contributions (NCC's) cap

In last month’s edition, we reviewed several key superannuation amendments which will come into effect on 1 July 2017.

This month, our experienced superannuation team takes the opportunity to examine the changes to the Non-Concessional Contributions (after tax contributions) cap in greater detail, highlighting how these adjustments will affect clients moving forward.

The list of changes include:

1. A reduction in the annual contribution cap which has reduced from $180,000 to $100,000.

2. A reduction in the three year bring-forward rule cap from $540,000 to $300,000.

3. No NCC's will now be available for those with superannuation balances exceeding $1.6 million.

1. Annual contribution cap reduction from $180,000 to $100,000.

From 1 July 2017 the annual NCC’s cap will be reduced from $180,000 to $100,000 per year. As such, those individuals who are eligible to make a superannuation contribution (anyone under the age of 65; or who are between 65-74 and meet the work test) will now be limited to a maximum after tax contribution of $100,000.

2. Reduction in the three-year bring-forward rule cap

As a result of the amendments to the annual contribution cap for the NCC’s, the three year bring-forward cap has also been adjusted and reduced from $540,000 (3x$180,000) to $300,000 (3x$100,000) over a three year period.

Please note that the reduction will be transitional over the next three years.

Based on this change, the 2016/17 financial year will be the last chance to make a NCC of $540,000.

Note: It is important to remember that the bring-forward rule is only available to those under the age of 65 who have not triggered the three year cap since 1 July 2014 (this will limit contributions through to 30 June 2017).

3. No NCC's will be available for those with superannuation balances exceeding $1.6 million

One of the most significant amendments to the recent superannuation reforms is the introduction of the $1.6 million cap on NCC top-up contributions.

As of 1 July, individuals will no longer be able to make a NCC if their balance exceeds $1.6 million at the end of the previous financial year, this will need to be reviewed on an ongoing basis.

Those with superannuation balances close to the $1.6 million cap will also be limited as to how much of the bring-forward rule they can utilise.

Your superannuation specialists

As you work your way through the myriad of changes, the majority of which will commence on 1 July 2017, please don't hesitate to utilise the experience and knowledge of your local adviser.