The SMSF Owners’ Alliance (SMSFOA) has commended Treasurer Scott Morrison’s decision to amend the federal government’s policy on the backdated $500,000 lifetime non-concessional contributions (NCC) cap, following concerns about the measure’s impact on contracts that were entered into prior to budget night.
On 3 May, the budget imposed a lifetime NCC limit of $500,000, which would be counted from 1 July 2007.
SMSFs in the process of buying an asset, such as a property, and that had entered into a legal contract for a limited recourse borrowing arrangement prior to the budget, expecting to use NCCs to complete the purchase, would have been caught by the backdated contributions cap.
Last week, the Treasurer advised the SMSFOA that transitional arrangements would be available without breaching the cap where an individual’s SMSF had entered into a contract for the purchase of an asset prior to 3 May and planned to make contributions to the SMSF to allow it to complete the purchase.
However, the additional contributions must be within the $180,000 annual limit for NCCs that existed prior to the 3 May budget.
In addition, transitional arrangements will apply to SMSFs with existing borrowings to ensure legal obligations that they entered into prior to 3 May can be met, but only until 31 January 2017.
The SMSFOA welcomed Morrison’s announcement.
“This decision addresses one of the concerns raised by SMSFOA and others about the impact of the new $500,000 cap,” SMSFOA executive director Duncan Fairweather said.
“Other concerns remain and we intend to pursue them with the government after the election.”
