The federal government’s non-concessional contribution (NCC) maximum threshold of $1.6 million has uncovered a set of new issues for the industry, with SMSF practitioners looking for answers to take back to their clients following the backflip on the lifetime NCC measure last week.
“Firstly, they made the threshold confusing by choosing the same figure as the $1.6 million pension balance transfer cap,” Townsends Business & Corporate Lawyers solicitor Julie Hartley told the SMSF Association New South Wales chapter breakfast in Sydney yesterday.
Importantly, the new NCC $1.6 million threshold raised a number of issues for SMSF advisers and clients, including questions about how the aggregate balance was to be determined for members with multiple super interests, Hartley noted.
“How is the threshold going to work if a member has got several balances in several super funds? How do we work out the threshold?” she said.
“Members assumingly will have to retain their balance statements and make sure they aggregate them all.”
Another area of uncertainly surrounded the ability to make top-up contributions where the super balance was $1.6 million or above, but then later reduced due to investment earnings, she said.
“If at 30 June 2017 the member’s account balance is $1.6 million, so they can no longer contribute, but what if the following year, it goes down to $1.4 million. Can they top it up?” she said.
“Or is it that once you reach the threshold you can’t ever make contributions? Or is it something that gets reassessed every year?
“Also what if the balance of the member goes down due to family law payments or a divorce, for example? Will there be any exemptions?”
Finally, how the threshold would be calculated was another unknown, she said.
“Is it going to be a dollar figure? As in, if you want to put in $1.4 million one year, does that mean you have $200,000 for the next year or do you work that out as a percentage like with the $1.6 million pension balance transfer cap?” she said.
“We have no detail. We have to wait and see.”
On 15 September, the government scrapped its proposed super measure for a $500,000 lifetime NCC cap.
It was replaced with an NCC cap of $100,000 a year with a maximum threshold of $1.6 million, and includes a three-year bring-forward rule.
Treasurer Scott Morrison said legislation for all measures would be introduced by the end of the year.
