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.
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a housing deposit, the Government proposes to allow voluntary contributions made to super funds after 1 July 2017 to be withdrawn for the purposes of buying a first home.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
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
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.
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
The Government has introduced changes to tighten up the rules around certain types of borrowing arrangements in self-managed super funds. Effective: Various
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
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
Further information on the budget is available on the Government’s website http://www.budget.gov.au/
If you would like further information on how this budget may impact you, we recommend that you seek financial advice. EISS Financial Planning can provide you with advice over the phone, at our offices or at a location near you. To find out more or to book an appointment, please call 02 9046 1920 or email us at firstname.lastname@example.org
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