In a recent newsletter, we discussed why we thought the sweeping changes to superannuation announced in this year's Federal Budget were bad for retirement planning. In particular, our assessment of the changes to the non-concessional contribution caps was that they were unnecessarily aggressive and retrospective. We highlighted a situation where, because the changes were to apply from Budget night, there might arise a situation where a person had entered a contract for an asset (such as property) prior to Budget night and yet was relying on non-concessional contributions made after Budget night to fulfil the contract.
We weren't alone in these concerns. Writing to the SMSF Owner's Alliance the Federal Treasurer has advised that transitional arrangements will apply to this very situation. SMSFs that were in the process of buying an asset and had entered into a contract before Budget night, but were relying on non-concessional contributions made after Budget night to complete the purchase, will be permitted to accept sufficient non-concessional contributions to fulfil the contract, even if this means that the member will exceed the new lifetime cap, provided the contributions are within the constraints of the old caps.
Transitional arrangements will also apply for SMSFs that have borrowings and rely on non-concessional contributions to fulfil the legal obligations of the borrowings, but only up until 31st January 2017.
This is welcome news, but coming almost two months after the Budget announcement, it may be too late for some account holders who were obligated to fulfil a contract in the time between Budget night and this clarification. It's this perpetual uncertainty in Superannuation, fuelled by successive Government policy changes, that is of most concern to us, as confidence in Superannuation as a retirement planning tool is increasingly undermined.