The federal government has scrapped its proposed $500,000 lifetime non-concessional contribution cap, replacing it with an annual limit of $100,000.
Federal Treasurer Scott Morrison has announced a series of changes to the 2016 budget measures affecting non-concessional superannuation contributions.
Mr Morrison said yesterday that the $500,000 lifetime cap on non-concessional contributions would be removed.
It will be replaced by an annual non-concessional contribution cap of $100,000 (down from $180,000 a year).
Australians aged under 65 will be able to 'bring forward' three years' worth of non-concessional contributions, Mr Morrison said.
Individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional (after tax) contributions from 1 July 2017, he added.
"This limit will be tied and indexed to the transfer balance cap," Mr Morrison said.
Australians aged 65 to 74 who satisfy the work test will still be able to make additional contributions to superannuation.
"This will encourage individuals to remain engaged with the workforce which is of benefit to the economy more generally," the Treasurer said.
The changes have been made after "extensive consultation", according to Mr Morrison, who said they will prevent superannuation from being used as an estate planning vehicle.
The Association of Superannuation Funds of Australia's interim chief executive, Jim Minto, welcomed the changes and encouraged the government to legislate them.
"The ceiling of $1.6 million, once it is legislated, balances the need to ensure enough income for a comfortable retirement with ensuring the level of tax concessions is sustainable in the future," Mr Minto said.
"This is the responsible thing to do for the superannuation system and for Australia’s long-term, fiscal sustainability," he said.