The move is likely to win the support of the Greens and the crossbench in the Senate but not Labor, which wants the cuts limited to businesses with a turnover of $2 million.
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Under the changes announced by the Treasurer, Scott Morrison said the $500,000 lifetime non-concessional cap would be replaced by a new measure to reduce the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year.
Among other changes, that’s now been scrapped, replaced by a yearly limit of $100,000.
‘These measures make the superannuation system even fairer, even more flexible and even more sustainable’.
To offset the cost of the reduced annual non-concessional cap, the treasurer has ditched plans to harmonise contribution rules for people aged between 65 and 74.
“While the government remains supportive of the increased flexibility delivered by this measure, it can no longer be supported as part of this package, without a net cost to the Budget”, the treasurer said.
The annual cap will be lowered by $80,000 to $100,000pa, while individuals with a superannuation balance above $1.6 million will not be able to make after tax contributions from the start of next financial year.
‘It also ensures that Australians are supported to maximise their retirement balances in the pension phase of superannuation where they access tax-free earnings, ‘ he said.
Under 65s can still “bring forward” three years’ worth of non-concessional contributions in a lump sum. They will be able to contribute $125,000 each year and, if taking advantage of the non-concessional “bring forward”, up to $325,000 in any one year until such time as they reach $1.6 million means-tested ceiling.
The redesigned package was ticked off by cabinet on Wednesday night and approved by the Coalition party room on Thursday morning.
Neil Mitchell has clashed with Kelly O’Dwyer over changes to the government’s superannuation policy.
‘We need this package to wash its face. we need to have that discipline and we have demonstrated that discipline by making some hard choices, ‘ she said.
Australian Chamber of Commerce and Industry chief James Pearson said the bulk of the benefit comes from the signal being sent to all business that the rate will go down to 25 per cent eventually.
The Nationals MP had proposed doubling the lifetime contribution cap to $1 million but said the new plan to do away with it altogether was “one step better”.
“They demonstrated the 45th parliament can come together to pass sensible economic reforms”, he said.
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During the election campaign, Prime Minister Malcolm Turnbull had described the super package as “ironclad” and Mr Morrison had, similarly, defended the package as set out in the May budget.
