Financial Services and Superannuation Minister Bill Shorten has released a discussion paper regarding the increase of the concessional contributions caps for people aged 50 and over with a retirement savings balance of less than $500,000.
The consultation paper outlines many of the proposed parameters as to how individuals can qualify for the increased cap limit.
For example, in relation to the date at which the $500,000 balance is measured, two options have been put up for consideration. One is for the balance to be assessed at 30 June in the year immediately before the contributions are to be made. That means 30 June 2012 would apply for contributions to be made during the 2013 financial year.
The rationale behind this method is that it would provide the most up-to-date balance to work from.
The second proposed date for measurement is two years before the end of the financial year in which the contributions are to be made. In this case, 30 June 2011 would be the relevant date for contributions made during the 2013 financial year.
In regard to the items that make up the assessable balance, the paper dictates for self-managed superannuation funds it should be all superannuation entitlements including an individual member’s share of any fund reserves.
“These changes will provide flexibility for those nearing retirement to make additional ‘catch-up’ contributions at the stage in their lives when they are most able to do so,” Shorten said.
The amendment to the caps is expected to have a positive impact on 275,000 people, including women with broken work patterns, and is proposed to take effect from 1 July 2012.
The Financial Services Council (FSC) welcomed the presentation of the new rules as a constructive move to help achieve adequacy.
“Raising the contribution caps recognises that many people have the capacity to increase their superannuation contributions in their 50s and should not be discouraged from doing so,” FSC chief executive John Brogden said.
Interested parties have until 25 March to respond to the paper.
