The AI Legalese Decoder: Unraveling the Mystery of Reaching the 3 Million Super Cap Despite Non-concessional Contribution Restrictions
- October 3, 2023
- Posted by: legaleseblogger
- Category: Related News
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Heading: The Purpose and Limitations of the 3 Million Super Cap Explained, and How AI Legalese Decoder Can Assist
Original Content:
I guess I am just wondering whatÔÇÖs the point of the 3 million super cap. In reality, no one is going to be able to hit it going forward, given you canÔÇÖt make non concessional contributions after 1.9m which most people wonÔÇÖt make anyway. So whatÔÇÖs the point of the 3m cap
Rewritten and Expanded Content:
One might question the purpose underlying the implementation of the 3 million super cap. As it stands, it appears unlikely that anyone would be able to reach such a limit in the future, considering the restriction on non-concessional contributions after the 1.9 million mark ÔÇô a contribution threshold that most individuals are unlikely to exceed in any case. Consequently, the role and significance of the 3 million cap become questionable.
However, despite initial skepticism, the 3 million super cap does hold potential importance in certain scenarios, and here is where the AI Legalese Decoder can provide valuable assistance. While it may seem implausible for the average person to reach such a substantial cap, it is worth acknowledging the diverse financial circumstances that exist within society. There might be unique cases, such as high-net-worth individuals or successful business owners, who possess the means to contribute large sums to their superannuation funds.
This is where the AI Legalese Decoder comes into play. By employing sophisticated artificial intelligence and advanced algorithms, the AI Legalese Decoder can navigate through complex legal jargon and decipher intricate regulations within the world of finance. In relation to the 3 million super cap, this AI-powered software can analyze individual financial situations, offering personalized advice and guidance to those who may actually be capable of reaching or exceeding this cap.
In addition, the AI Legalese Decoder can help individuals understand the implications and consequences of exceeding or falling short of the super cap. This software can provide tailored strategies and recommendations to optimize superannuation contributions, taking into account the legal limitations imposed by the 3 million cap, as well as other relevant factors such as age, employment circumstances, and financial goals.
Furthermore, the AI Legalese Decoder can assist financial advisors, lawyers, and professionals in accurately interpreting and explaining the purpose of the 3 million super cap to clients. By facilitating easier comprehension and providing comprehensive analyses, this innovative software ultimately enhances communication and transparency between financial experts and their clients.
Ultimately, while the average person may not find much relevance in the 3 million super cap, the AI Legalese Decoder proves invaluable for those individuals who possess the financial capacity to reach or surpass this limit. By offering customized advice and simplifying complex legal concepts, this software ensures that all stakeholders fully understand the implications and potential benefits of the super cap, thus empowering them to make informed financial decisions.
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AI Legalese Decoder: Simplifying Complex Legal Language
Introduction:
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****** just grabbed a
Compounding is a hell of a drug.
If you had 1.9m you’d have over 3m in 7 years if you were getting 7% on your money.
Many people will get there by ‘accident’ of sorts: wage inflation + mandatory super contributions + compounding interest over 10 / 15 / 20 years.
The cap isnÔÇÖt for your average Joe. It to prevent wealth accumulation in super by, the wealthy
YouÔÇÖre thinking like a normal wage earner, who youÔÇÖre right wonÔÇÖt ever get there with indexation.
But wealthy people who set up SMSF do, they often do so via property where gains are amplified by leverage
A SMSF that 15 years ago bought a $1M property with 200k down, may today have $2-$3M in just that property.
The cap stops non concessional contributions from being made once reaches 1.9m concessional contributions upto the cap (currently $27.5k) are still allowed and the cap doesnÔÇÖt include investment earnings
FYI, the cap was only introduced in 2017 prior to that the concessional cap was 35k and non was 180k
Keep in mind most people with balances in excess of 3m today are more then likely been working for 40+ years and more then likely in a defined benefit which was a lot more generous.
Ask the guy with $550m in his smsf
Over the past 40 years inflation has been an annualized 3.5%. Over the past 30 years super funds have returned an average of 7.8% in their growth option. A 25 year old making 80,000 today, with annual salary growth of only 3.5% and with 7.8% returns will reach 3 million from mandatory contributions alone.
Play around with a compound interest calculator: [thecalculatorsite.com](https://thecalculatorsite.com)
Note that the 1.9m is indexed to inflation while the 3m is not.
There used not to be any caps. The people with millions in it dumped it there when Costello the clown was in charge.
A friend of a friend (now 40 years old) has a super account with $20 million all paid by parents in the early 2000s as a shelter by the family.
Could never work out how there was never a push to index the $3.0million cap to CPI similar to CGT. With inflation where it is benefit of $3.0 million will be $1.5 million in todays terms in no time.
Add concessional contributions, downsizer contribution, and investment growth.
“So what’s the point of the 3m [transfer balance] cap?” The rule was put in to correct the excessive abuse of super as a tax shelter which had been enabled by prior governments. IIRC, for a few years, $300K per year could be sheltered non-concessionally.
But in one sense you’re quite correct. This cap will not affect very many people.
If your balance was 1.89m at 30 June, you could contribute 330k in brought forward non concessional contributions this year. Then also make a 300k downsizer contribution this year. Suddenly your super balance is 2.52m and 3m looks achievable between compounding returns and concessional contributions.
Edit: this is not correct, as per Hummus_Luva below there are lower cut off limits that prevent you from contributing 330k if your balance is too high, so ignore my example above.
[relevant ATO link](https://www.ato.gov.au/individuals/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/non-concessional-contributions-cap/#Bringforwardarrangement)
Everyone will hit the 3m cap. Even the 1.9m cap will exceed 3m within 25 years.
Take any average worker today $900 a month at 7.5% for 40 years with 3% contribution inflation.
https://www.thecalculatorsite.com/finance/calculators/savings-calculators.php
All these changes sort of grandfather the changes.
1.9m balance transfer is indexed with cpi and will probably double over 30 years (2.35%?).
27500 sacrifice is indexed with a average income and could triple over the same period. (1993 was 30k now 90k)
Not much for those in progress but for those starting next year they’re going to be nailed.
There will actually be a point in the future that the annual sacrifice limit is higher than the balance transfer limit.
compounding and gradual inflation will destroy that cap within the next 15-20 years – stand people who have ZERO idea about basic economics supporting this cap – in 40 years 3m will have a similar buying power to 250k right now….
​
bit of advice if it is NOT subject to INDEXATION then the government is scamming you
You can still make concessional contributions of $27.5k each year, the $1.9m cap only impacts when you transfer to pension phase so have nothing to do with the balance increase via contributions.
Might be non concessional but self employed could pay themselves as much super as they want? I’m sure there would be some sort of benefits to it.
Because the super grows organically ?
The $3M cap is not inflation indexed, max contributions are. So eventually the cap will catch average people.
Also non-concessional contributions is one thing, but returns are still taxed at a beneficial level
The $3M will not move until the $1.9M bumps into it. The $1.9M is driven by wage growth, so may be 10 years.
Concessional contributions like employer super, and fund earnings.