On 15 September 2016, the Treasurer and Assistant Treasurer issued a joint media release about the Government’s (then) recent changes to the Superannuation Policies they announced in the last Federal Budget (2016/17) and took to the election (dropping the controversial lifetime cap of $500k on undeducted (non-concessional) contributions backdated to 2007).

$500k lifetime limit on non-concessional contributions (back to 2007) ditched – $180k limit reduced to $100k

The Government announced that it will not proceed with its 2016-17 Budget proposal for a $500,000 lifetime cap on non-concessional contributions (backdated for contributions since 1 July 2007). Instead, the Government has now proposed an annual non-concessional contributions cap of $100,000 pa (down from the current $180,000 cap). Individuals under age 65 will still be able to use the 3-year “bring forward” rule for non-concessional contributions (ie $300,000 over a 3-year period).

Individuals with a superannuation balance of more than $1.6m will no longer be eligible to make non-concessional (after tax) contributions from 1 July 2017. This limit will be tied and indexed to the proposed $1.6m transfer balance cap for retirement accounts (ie pension phase). This $1.6m eligibility threshold will be based on an individual’s balance as at 30 June the previous year. According to the Government, individuals will be able to contribute a total of $125,000 per year, being $25,000 of concessional contributions plus $100,000 of non-concessional contributions, until they reach $1.6m. If taking advantage of the “bring forward” rule, a total of $325,000 could be made in any one year, the Treasurer said.

‘Work test’ for contributions over 65 (up to 74) won’t proceed (cost offset)

In addition, as part of the Coalition’s compromise on its superannuation package, it will not proceed with the Budget proposal to remove the work test for making contributions between ages 65-74. As such, people aged 64-75 will still need to satisfy the work test (ie gainful employment for at least 40 hours in a 30 day period in the financial year) to make voluntary superannuation contributions.

‘Catch-up’ concessional contributions for balances under $500k deferred one year (cost offset measure)

The Government also announced that the start date for the proposal to allow catch-up concessional contributions for superannuation balance less than $500,000 would be delayed to 1 July 2018 (instead of 1 July 2017).

Further details and facts sheets are available on the Treasury Website.

[LTN 179, 15/9/16]

A.  $500,000 life time cap replaced by $100,000 cap on non-concessional contributions (in lieu of $180k)

  1. The $500,000 lifetime non-concessional cap will be replaced by a new measure to reduce the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year.
  2. Individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums. The overwhelming bulk of such larger contributions are typically less than $200,000.
  3. Individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional (after tax) contributions from 1 July 2017. This limit will be tied and indexed to the transfer balance cap.
  4. The $1.6m cap continues to be the balance where earnings are free of tax in the fund.
  5. Less than 1 per cent of superannuants now reach the proposed transfer balance cap of $1.6 million.


B.  NO harmonisation of contribution rules for those 65 to 74 (cost offsetting)

  1. The Government will now not proceed with the harmonisation of contribution rules for those aged 65 to 74 (removing the work test for contributions to super).  While the Government remains supportive of the increased flexibility delivered by this measure, it can no longer be supported as part of this package, without a net cost to the Budget.
  2. Individuals aged 65 to 74 who satisfy the work test will still be able to make additional contributions to superannuation. This will encourage individuals to remain engaged with the workforce which is of benefit to the economy more generally.

C.  Catch-up concessional contributions deferred to 1 July 2018 (cost offsetting)

  1. In addition, the commencement date of the proposed catch-up concessional superannuation contributions will be deferred by 12 months to 1 July 2018 to ensure the full cost of changes to non-concessional contribution arrangements are met over both the forward estimates and the medium term.

These measures will ensure that 96 per cent of Australians remain better off or unaffected by the Government’s superannuation reforms that will introduce greater flexibility and sustainability to our retirement income system.

Impact on Underlying Cash Balance

Forward estimates ($m) Total to 2026-27 ($m)
Non-concessional contributions cap -400.0 -2,200.0
Reversal of Budget measure to harmonise contribution rules for those aged 65 to 74 180.0 1,920.0
Deferral of Budget measure to allow carry forward of unused concessional  contributions cap 400.0 950.0
TOTAL 180.0 670.0


Fact sheets on the Government’s superannuation changes are available at www.treasury.gov.au/SuperReforms

Draft legislation has been released for consultation and is available HERE.

[Treasurer – Media Release] [LTN 173, 7/9/16]