Federal Budget 2017
Federal budget 2017
Measures to tackle home affordability were a key focus of this year’s Federal Budget, along with a company tax cut, an increase in the Medicare levy, changes to school funding models and the introduction of a new bank levy.
Two of the measures on home affordability directly involve superannuation – a newly announced First Home Super Saver Scheme and a scheme to facilitate downsizing among older people. Importantly, the first home saver scheme relates to voluntary super contributions, not existing compulsory super savings.
There were no other major superannuation changes announced, though it is worth keeping in mind that most of the super changes announced in last year’s budget are still to come into effect on 1 July this year.
While not directly related to superannuation, the reinstatement of the pensioner concession card for those who lost part-age pension this year is a welcome move in this year’s budget.
Please note, these measures have been proposed by the Government, but are not yet legislated.
First Home Super Saver Scheme
In a move aimed at helping first home buyers build a housing deposit, the Government proposes to allow voluntary contributions made to super funds after 1 July 2017 to be withdrawn for the purposes of buying a first home. Contributions into a super fund will be allowed by salary sacrifice up to a maximum of $15,000 per year, or a maximum of $30,000 in total. Where there is a couple involved, both individuals will be able to utilise their caps. Please note, these contributions will count toward the annual Concessional contribution cap of $25,000 per person from 1 July 2017.
Withdrawals will be allowed from 1 July 2018 onwards, with a concessional tax applying to withdrawals (along with a deemed earning rate that the Australian Tax Office applies). This concessional tax will be at a rate of marginal tax rates less a 30 per cent offset – effectively making withdrawals tax-free for anyone earning up to $87,000. According to Government estimates, the scheme will see a couple accumulating an extra $12,484 on combined savings of $60,000 over three years than if they had saved in a standard bank deposit account. Effective: 1 July 2017
Contributing the proceeds of downsizing into superannuation
Retirees aged 65 and over who downsize their homes will be able to contribute up to $300,000 of the proceeds into superannuation as a non-concessional (post-tax) contribution. This will be allowed in addition to existing super rules and caps including the total super balance cap of $1.6 million. The measure is exempt from the work test however it will not be exempt from the $1.6 million transfer balance cap (which limits the amount of money you can put into a pension phase account where the earnings are tax free). Effective: 1 July 2018
Reinstatement of pensioner concession card
Earlier this year, some pensioners affected by the changes in January to the age pension assets test taper rate lost their Pensioner Concession Cards. Changes announced in this budget reinstate pension cards for those affected. Effective: To be confirmed.
New Financial Complaints Authority for consumers
The Government is proposing a one-stop External Dispute Resolution (EDR) scheme to replace the Financial Services Ombudsman, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. Importantly, the Government has stated that the existing statutory protections applying to superannuation disputes will continue. Effective: 1 July 2017
Tax integrity changes (mostly applicable to self-managed super funds)
The Government has introduced changes to tighten up the rules around certain types of borrowing arrangements in self-managed super funds. Effective: Various
Medicare levy to increase
The Government will increase the Medicare levy by half a percentage point from 2.0 to 2.5 per cent of taxable income. The increase is to ensure that the National Disability Insurance Scheme (NDIS) is fully funded.
This will impact the rates at which superannuation funds must withhold Pay As You Go tax from members’ benefit payments. Effective: 1 July 2019
Restrictions on deductions for residential property investments
The depreciation deductions for residential plant and equipment (e.g. dishwashers and ceiling fans) will be limited to investors who actually incur the outlay – not subsequent owners. Also from that date, investors will be unable to deduct travel expenses related to inspecting, maintaining or collecting rent for a residential rental property. Effective: 1 July 2017
Other proposals
- Income thresholds for the repayment of HELP debts will be revised, along with repayment rates and the indexation of repayment thresholds from 1 July 2018.
- A new Jobseeker Payment will replace 7 existing working age payments from 20 March 2020.
- Job seekers and parents who receive working age income support will have increased activity test requirements from 20 September 2018.
- The maximum length of the Liquid Assets Waiting Period will increase from 13 weeks to 26 weeks from 20 September 2018.
- A one-off Energy Assistance Payment of $75 for single recipients and $125 for couples will be paid for those who qualify on 20 June 2017.
- Family Tax Benefit rates will not be indexed for 2 years from 1 July 2017.
- A new upper income threshold of $350,000 pa will apply to the child care subsidy from 1 July 2018.
Further information on the budget is available on the Government’s website http://www.budget.gov.au/
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