Permanent contributions cap for over-50s: what are the proposed rules?

Q: Thank you for your newsletter. I always enjoy reading it, and find it very informative. I am single and 56 years old and hope to retire at age 60. I currently salary sacrifice the maximum of $50,000 into super, (this includes the 9% super guarantee from my employer). Now with the new $500,000 limit introduced after the Henry Review does that mean that once I reach $500,000, I won’t be able to salary sacrifice at the concessional level? I also have another $180,000 from the sale of a property that I was planning to put into super as a non-concessional contribution. Does that non-concessional contribution also count towards the $500,000 account balance limit?

You are referring to the Federal Government’s response to the Henry Tax Review report. In the Government’s response, it announced that Australians aged 50 or over will retain the $50,000 cap for concessional (before-tax) contributions from July 2012, subject to satisfying certain conditions.

According to the announcement, individuals aged 50 or over can continue to access the $50,000 concessional cap (which will be indexed) provided that the individual’s superannuation account balance is less than $500,000. From the information on the Government’s tax reform website, it is not clear whether the $500,000 rule applies only when you reach 50, or whether it applies whenever you want to make contributions on or after the age of 50. The Government intends to consult with the super industry about the mechanics of the $500,000 threshold.

Although the detail on the policy change to the concessional caps is not yet clear, but my understanding is that the $500,000 threshold will be on the total account balance, regardless of whether you have made concessional or non-concessional contributions.

Now that an election has been called, I don’t believe that you can rely on the Henry Review announcements until we know which political party will be in power. I will update the site when I have further information on this policy announcement.

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