Treasurer Confirms Lifetime Contribution Cap Leeway

Treasurer confirms lifetime contribution cap leeway

In a letter recently issued by the Treasurer, some transitional rules were outlined for clients caught in the middle of strategies by the imposition of the proposed $500,000 lifetime non-concessional cap.

These concessions only apply if:

  • An LRBA (Limited recourse borrowing arrangement) was already in place at Budget Night (3 May 2016).
  • An asset purchase contract was signed before Budget Night (3 May 2016) with a later settlement which required contributions for completion (this option does not necessarily need borrowings).

Existing LRBAs
The concession relates to additional non–concessional contributions made for the purpose of bringing a related party LRBA in line with the safe harbour guidelines as outlined in the ATO Practical Compliance Guidelines 2016/5.

These contributions need to be made by the 31 January 2017 deadline.

Pre-existing contracts
For purchases where the contract was signed before Budget Night, transitional provisions will apply to allow further non-concessional contributions to be made only to the extent necessary to complete the pre-existing contract.

In both circumstances it appears the concession will apply where no other practical option exists. The contributions made must be within the non-concessional cap that applied prior to Budget Night ($180,000/$540,000) and the amounts will count towards the new lifetime cap but will not result in a breach of this new cap.

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