14 Jun 06 Transitional super contribution measures announcedIn a press release issued on 13 June 2006, the Treasurer, Peter Costello, announced transitional provisions to apply to the proposed $150,000 annual cap on post-tax contributions announced in A plan to simplify and streamline superannuation and the payment rules for people aged 65 and over.
The Government has decided that it will allow the cap to be averaged over three years to allow people to accommodate larger one-off payments. Post-tax contributions made between 1 July 2005 and Budget night 9 May 2006 would not count towards the cap. This means that the 2005-06 cap of $150,000 will only apply for contributions made between 10 May 2006 and 30 June 2006.
Under these proposed averaging arrangements, it would be possible for a person to contribute $450,000 of post-tax contributions between 10 May and 30 June 2006. This comprises the full utilisation of the 2005-06 entitlement and a bring forward of 2006-07 and 2007-08 entitlement. Further post-tax contributions could then not be made until 1 July 2008.
Alternatively, a person could contribute $150,000 between 10 May 2006 and 30 June 2006. A further $450,000 could then be contributed between 1 July 2006 and 30 June 2007 (comprising 2006-07 entitlement and a bring forward of 2007-08 and 2008-09 entitlement). Under this scenario, no further contributions could be made until 1 July 2009.
The annual entitlement will operate on a ‘use it or lose it’ basis, that is if a cap is not fully utilised in any year then the unused amount cannot be credited to a future year.
The Treasurer confirmed that the cap would exclude the CGT exempt component from the sale of a small business. This would allow each small business owner to contribute up to $500,000 of capital gains into a superannuation fund in addition to contributions allowed under the cap.
The Government is also proposing to bring forward the removal of the payment rules for people aged 65 and over to 10 May 2006. This would allow people who are over 65 and no longer working and people aged 75 to defer cashing their superannuation benefits to take advantage of the new tax regime and flexible draw down rules applying from 1 July 2007.
For a copy of the Treasurer's press release, No 2006/057, 13 June 2006, go here