Superannuation fund members who previously relied on the annual non-concessional contributions cap (NCC) of $180,000 may now have no or little lifetime NCC cap left remaining, according to DBA Lawyers.
This comes off the back of the proposal of the $500,000 lifetime NCC made in the Budget last week.
An analysis by DBA Lawyers director, Daniel Butler, and special counsel, Rebecca James, said as the current legislation was implemented on 1 July 2007 and if NCCs were made during the nine years and did not exceed $500,000, then there may be some remaining cap.
"If someone makes an NCC after the Budget announcement at 7.30pm on 3 May 2016, including any NCCs made in the prior nine year period that exceeds $500,000, then their super fund must either reject any excess amount or the excess will be taxed at 49 per cent if the member leaves the excess in their super account if possible," the analysis said.
"There is doubt as to whether the announcement will allow the excess to remain in the superannuation fund given the little detail on this announced change."
The analysis said the recent limits on making NCCs were:
"Given the far more generous contribution caps applying before 4 May 2016, the $500,000 lifetime cap is a retrospective and an unfair change of law made by way of Budget announcement especially as it may not survive the political and legal process that lies ahead," it said.
They said the cap did not allow any flexibility for the numerous investment timing and life cycle risks that could arise.
"Being prospective, if the limit is $500,000 then most people will hopefully adjust and learn to live with this new limit. However, to then seek to impose a retrospective nine year inclusion period on prior contributions when people have gone about their affairs in an ordinary and lawful manner is unreasonable and should not be tolerated by our community," Butler and James said.
"Indeed, the current Government has misrepresented that there will be no adverse super changes. A change of Prime Minister in September 2015 is no excuse for such poor law making."
The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.