Superannuation Cap Confusion
Superannuation is supposed to be for your retirement. Indeed, the 'sole purpose' of superannuation is intended to provide for your retirement.
Because of the concessional taxes that apply within the superannuation environment the Government has been increasingly restricting people from being able to contribute 'too much'. The idea, is they want you to save for your retirement, just not too much.
Then comes the dual decisions of the 2017 Federal Budget:
to allow prospective first home buyers to make additional, voluntary contributions of up to $15,000 per year and no more than $30000, so long as those contributions come within the (new, lower) cap of $25,000 per year;
to allow older people to cash out of their long-term homes and downsize, and be entitled to contribute up to $300,000 per person into their superannuation accounts.
Sounds great doesn't it?
But the policy is back-to-front, with the way these two new policies interact with 'caps'.
By allowing first home buyers to use their superannuation account to tax effectively save for part of their future property purchase, they are using superannuation for a purpose other than the 'sole purpose'.
So if you allow that, considering buying a property has nothing to do with superannuation, what is the point of limiting the contributions to the annual contribution caps? A taxpayer on a higher income, receiving higher superannuation guarantee contributions, can contribute less for the purpose of funding their first home deposit.
This is nonsense.
The cap limitation makes no sense, but that is the policy.
But don't worry, Hardly any first home buyers will bother, as we explain here.
At the other end of policy with the lifetime cap, where the Government has set the tax-free lifetime superannuation balance limit at $1.6m was supposed to be steadfast. No compromises.
And yet, if you downsize your home, you can contribute up to $300,000 extra to your superannuation fund, and you effectively get access to a cap of $1.9m.
So someone who doesn't need to downside because they are already in a small enough home, can only access $1.6m as their cap, compared to someone downsizing with the new rules, can access a higher cap.
Logic, or fairness, is clearly not a priority.