On Tuesday 9 May 2017, the Federal Government announced its 2017-18 budget with limited changes to super legislation when compared against the 2016-17 budget.
We've summarised the key super changes below:
First Home Super Saver Scheme (FHSSS)
This new scheme will allow Australians to save for their first home through contributions to their superannuation account.
By leveraging infrastructure of the super system, first home savers will benefit from concessional, or lower, tax treatment on contributions and earnings. These contributions will differ from other super contributions by being eligible for withdrawal (subject to certain conditions).
First home savers can choose to salary sacrifice from pre-tax dollars to maximise the benefits of the FHSSS. Those who don’t have access to salary sacrifice options as a result of their employment arrangement can claim a tax deduction on their personal contributions, meaning savings effectively come out of pre-tax income.
From 1 July 2017, the FHSSS enables individuals to make voluntary contributions of up to $15,000 per year and $30,000 in total to their super account for first home deposits.
Before tax, or concessional contributions, will be part of the $25,000pa concessional contributions cap. Withdrawals will be taxed at marginal tax rates less a 30% offset and allowed from 1 July 2018.
After tax, or non concessional contributions, can also be made as part of the $100,000pa non concessional contributions cap and withdrawals will not be taxed.
The FHSSS will be administered by the ATO, which will determine the amount of contributions that can be released and instruct superannuation funds to make these payments accordingly.
The amount of earnings that can be released will be calculated using a deemed rate of return based on the 90 day Bank Bill rate plus three percentage points (as per the Shortfall Interest Charge).
To learn more about this proposal, see the First Home Super Saver Scheme fact sheet.
Reducing barriers to downsizing
To increase housing supply, the Government has announced incentives to support older Australians to sell their home and build super savings.
From 1 July 2018, Australians aged 65 and over will be able to make an after-tax (non concessional) contribution to their super of up to $300,000 from the proceeds of selling their home.
This announcement applies to the sale of a principal home which has been held for 10 or more years. If the sale is made by a couple, both members can take advantage of this benefit, meaning $600,000 per couple can be contributed to super through the downsizing cap.
Those with $1.6m balance in super accounts, are still eligible to make this contribution. Contributions of this nature are not exempt from the $1.6m pension transfer balance cap (which limits the amount of money you can put into a pension phase account where the earnings are tax free).
To learn more about this proposal, see the Reducing barriers to downsizing fact sheet.
Super complaints resolution
On 1 July 2018, a new dispute resolution body called the Australian Financial Complaints Authority (AFCA), will replace the current Superannuation Complaints Tribunal (SCT).
AFCA will act as a one stop shop for all disputes related to financial institutions including banks, superannuation funds and insurance providers.
The service provided by AFCA will remain free to all consumers, address wrongful loss and determine fair compensation with decisions to be binding on all participants.
For more information about this proposal, see Banking and Financial Services, Improving dispute solution section.
Non super changes
There are also key non-super changes which we've summarised below:
Medicare Levy increase
In 2019, the Medicare Levy is proposed to increase by 0.5% to 2.5%. This increase has been proposed to close the National Disability Insurance Scheme (NDIS) funding gap.
Pensioner concession cards restored
Under pension asset test changes introduced on 1 January 2017, some Australians lost access to the pensioner concession card. A proposal announced in the budget will reverse these changes, resulting in the restoration of some of the cards.
For more information about the full range of budget announcements, see the Budget 2017-18 website.
As always, if you have any questions please call us on 13 MINE (13 64 63), email firstname.lastname@example.org or contact your financial adviser. We can also put you in touch with Mine Wealth + Wellbeing Financial Advice to discuss your personal circumstances.
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