Among the changes that Labor has planned for superannuation, if it wins the election, is one that has not had much attention. It would lower the non-concessional contribution rate.
Under current arrangements, super fund members can make non-concessional contributions of up to $100,000 a year, as long as their super balance is under $1.6 million.
Non-concessional contributions typically come from the proceeds of selling an investment, receiving an inheritance or a redundancy payment.
People under age 65 can use the “bring forward” rule and make a non-concessional contribution of $300,000 that covers the following three years. If the account balance is getting close to $1.6 million (above $1.4 million), the amount that can be brought forward is reduced.
Under Labor’s policy, the non-concessional contribution cap would fall to $75,000.
The bring forward rule would change to a one-off contribution of $225,000 for an individual or up to $450,000 for a couple.
Labor has no plans to change to concessional contributions rules, which allow for a maximum concessional contribution of $25,000 a year.
Fund members who make personal contributions, such as contractors putting money in their super accounts themselves or employees who want to top up their super above the 9.5 per cent super guarantee, can claim a tax deduction on those contribution amounts.
Labor has indicated that it might restrict access to this deduction but it has not provided details.
Another arrangement that would change under a Labor government is catch-up provisions for concessional contributions. Under the current arrangement, fund members can carry forward contribution shortfalls for up to five years (the shortfall is the difference between concessional contributions made to a super account and the $25,000 cap).
To be able to use the catch-up arrangements, the super balance must be less than $500,000. Labor has said it would abolish catch-up contributions.