The change to the contributions cap rules for individuals who are 50 years of age and over could prove to be problematic for self-managed superannuation funds (SMSFs), according to superannuation experts.
Handed down as part of this year’s federal budget, individuals aged 50 and over with a superannuation balance of below $500,000 will continue to have a concessional contributions cap limit of $50,000 applying to them with no time limit.
However, the deemed qualifying maximum retirement savings level of $500,000 may be problematic.
“Where did this figure of $500,000 come from and what exactly does it mean? Does that mean if you have $500,000 in your super fund that you automatically have sufficient benefits accumulated for your retirement?” Deloitte private superannuation partner Mark Wilkinson said.
“Or is it tied to low-income earners and what they should have in their funds for their retirement?”
Other industry experts feel policing the limit will be extremely difficult in the context of SMSFs, where returns and the collection of information still has a lag factor associated with it.
“It’s $500,000 from when?” SMSF Strategies principal Grant Abbott asked.
Eureka Financial Group SMSF specialist adviser Andrew Jones echoed these sentiments.
“Is it $500,000 from the time you make the contribution or is it from the start of the financial year?” he said.
Wilkinson explained the new rules will also mean individuals will employ a range of different strategies to make sure their superannuation balance stays below the prescribed limit.
“Splitting your contributions [with your spouse] will be much more popular than it has been in the past,” Wilkinson said.
“It will raise some interesting questions with regard to valuations of assets, and I also suspect that you will find there will be a resurgence in the number of funds having reserves,” he added.
