TREASURER Scott Morrison has taken steps to remove some retrospective aspects of the proposal in last month's budget to limit non-concessional caps.
The original proposal was a lifetime limit of $500,000 on such contributions to take effect from budget night and it was to be backdated to include all non-concessional contributions made in the preceding 10 years.
Suppose a self-managed superannuation fund had entered into a contract to buy an asset using a limited recourse borrowing arrangement before budget night with settlement of the contract due after budget night. In such transactions it would be normal for part of the proceeds to be provided by fund members making non-concessional contributions to the fund to enable the fund to complete the contract.
As I pointed out in previous columns, this could put the buyer in an impossible position: if their non-concessional contributions before budget night had already exceeded $500,000 in the last 10 years they may well be unable to contribute the funds to allow the purchase to proceed. Consequently, the contract could be rescinded and the deposit forfeited.
The Treasurer has announced that transitional provisions will apply to allow further non-concessional contributions to be made in such situations to the extent necessary to enable the contract to be completed, taking into account existing financial arrangements. These additional contributions will count towards the lifetime non-concessional cap if the total figure is still under, but will not result in an individual being in breach of the lifetime non-concessional cap if the transaction brings the figure over the limit.
This is certainly good news for people who would have been adversely affected by the changes, but I believe there is even better news for everybody. When discussing this matter with the Treasurer this week he pointed out that the Coalition, if re-elected, will consult with industry stakeholders and be open to any other reasonable amendments that are bound to crop up when the regulations are being drafted.
In saying so, he also made it plain that the substance of the changes was not negotiable.
Noel Whittaker is the author of Making Money Made Simple. His advice is general and readers should seek professional advice before making any financial decisions. Email: email@example.com
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