By John Collett

You’d have to say Treasurer Scott Morrison’s re-set of the cap on non-concessional superannuation contributions is a deft move.

It’s a big cave-in to the wealthy dressed up as something less generous. The best tax shelter for the well-off this side of the Cayman Islands survives pretty much intact.

Government’s super compromise
Treasurer Scott Morrison has announced changes to the Government’s superannuation policy after much opposition to the original plan.
The change to the cap should see the government’s entire superannuation package of reforms passed by parliament. So it looks as if we can be fairly certain that this will now be the rules under which super will work for many years to come.

In its May budget, the Turnbull government said there would be a lifetime cap of $500,000 on non-concessional contributions to super.

other source that can be put into super where, in retirement, no further tax is paid on the money.

The cap is $180,000 a year, and under the “bring-forward” provision, up to three years of contributions can be made in one year.

The re-setting by Morrison of the cap for non-concessional contributions from July 1, 2017 at $100,000 is a big win for those who have the means to take full advantage of it.

However, there’s a rider in Morrison’s re-set on the cap. Those with superannuation balances of more than $1.6 million will no longer be eligible to make non-concessional contributions from July 1, 2017.

That appears to make the non-concessional cap much less generous for the wealthy. But that would be a misreading, when it is remembered how the $1.6 million cap will work.

Every dollar above $1.6 million in retirement can stay inside super where a tax of only 15 per cent will be paid on the earnings of each dollar above $1.6 million.

That 15 per cent tax rate is even less with the benefit of dividend imputation credits.

As Morrison says, the measures mean that together with annual concessional contributions, such as salary sacrificing to super, a person will be able to contribute $125,000 each year.

The minority of people who have the means to take advantage of the cap has cause to celebrate.

For the vast majority of ordinary salary and wages earners, the change to the non-concessional cap means practically nothing.

IMAGE: The minority of people who have the means to take advantage of the cap has cause to celebrate. Photo: Jessica Shapiro

For more on this story and video go to: http://www.smh.com.au/money/super-and-funds/scott-morrisons-super-cap-change-a-cavein-to-the-wealthy-20160915-grgwkt.html