People who have exceeded their concessional contributions cap may be forced to manage an extra layer of complexity in having to comply with the proposed $500,000 lifetime non-concessional contributions cap contained in the federal budget, according to a superannuation technical expert.
Speaking at the SMSF Association Sydney chapter breakfast last week, SuperConcepts technical services and education general manager Peter Burgess said: “A problem here is for people who have gone over their concessional cap, we know that actually that excessive amount counts toward their non-concessional cap.
“Now not a lot of systems actually record that as a non-concessional contribution.
“I’m not sure how the ATO deals with those issues, so you just need to be careful if you’ve got clients who have gone over the concessional cap to make sure that excessive portion actually has been counted against their non-concessional cap.”
In light of the uncertainty over the proposed lifetime non-concessional contributions cap due to the impending federal election and the parliamentary process of passing the new legislation, Burgess said advisers should adopt a very cautious approach to the set of circumstances.
“If it was me in these situations I’d certainly be encouraging clients to defer making any non-concessional contributions that are likely to push them above $500,000 until at least such time that we’ve got the legislation so we actually know what the penalty is going to be if they do go over their non-concessional cap,” he said.
Due to the potential imposition of the lifetime non-concessional contributions cap and a variety of other factors, Burgess labelled the end of the 2016 financial year as the most significant ever for the SMSF sector.
“This year, the end of financial year is probably more significant than it’s ever been for the self-managed super funds sector when you think about some of the things that are happening,” he said.
“The transitional rules around collectables are coming to an end as we know, the accountants’ exemption is coming to an end and we’ve also got these budget changes in the mix as well.”