Federal Budget 2017: what it may mean for your super and retirement10 May 2017
On Tuesday 9 May 2017, the Turnbull Government handed down the 2017-18 Federal Budget. Measures to tackle home affordability were a part of this year’s Federal Budget, with two of these measures directly involving superannuation, including a newly announced First Home Super Saver Scheme and a scheme to facilitate downsizing among older people.
Subject to legislation, these measures have different starting dates, some are effective immediately or on 1 July 2017, and others in the years following. Below is a summary of the key changes.
FOR SUPER MEMBERS
First Home Super Saver Scheme
Effective: 1 July 2017
In a move aimed at helping first home buyers build a housing deposit, the Government proposes to allow voluntary contributions to super funds to be withdrawn for the purposes of buying a first home.
Super fund members will be allowed to make personal contributions and/or salary sacrifice up to a maximum of $15,000 per year, and will be limited to $30,000 in total under the scheme. Where there is a couple involved, both individuals will be able to take advantage of this measure to buy their first home together.
Many employees will be able to take advantage of salary sacrifice arrangements to make pre-tax contributions. Individuals who are self-employed or whose employers do not offer salary sacrifice can claim a tax deduction on personal contributions.
Non-concessional contributions can also be made within the scheme. While these contributions will not benefit from a tax concession, earnings on these contributions will benefit from the concessional rate of tax in super.
Voluntary contributions under this scheme must still be made within existing super contribution caps. The total concessional contributions an individual can make, from both compulsory employer contributions and voluntary contributions (including those made under the scheme) cannot exceed $25,000 in 2017-18. Concessional contributions and earnings will, while in the fund, continue to be taxed at 15 per cent.
Withdrawals will be allowed from 1 July 2018 onwards, with concessional contributions and associated earnings to be taxed at the individual’s marginal rate, less a 30 per cent offset. When non-concessional amounts are withdrawn, they will not be taxed.
Contributing the proceeds of downsizing into superannuation
Effective: 1 July 2018
People aged 65 and over will be able to make a non-concessional (after-tax) contribution of up to $300,000 into their super fund from the proceeds of selling their home, as long as it has been their principal place of residence for a minimum of 10 years.
These new contributions will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps. For example, people aged 65 and older (work test for 65-74 year olds, no contributions for those aged 75 and over) and those with super balances above $1.6 million will still be able to take advantage of this new downsizing cap; however the new $1.6 million transfer balance cap will still apply.
Where there is a couple involved, both individuals will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to superannuation through the downsizing cap.
New Financial Complaints Authority for consumers
Effective: 1 July 2017
The Government is proposing a one-stop External Dispute Resolution (EDR) scheme to replace the Financial Services Ombudsman (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
The SCT, FOS and CIO will continue to operate until they are wound down by 1 July 2020, to allow them to clear their existing caseloads.
FOR PENSION MEMBERS
Reinstatement of pensioner concession card
Earlier this year, some pensioners affected by the changes to the age pension assets test taper rate lost their Pensioner Concession Cards. Changes announced in this budget reinstate pension cards for those affected.
FOR ALL MEMBERS
Medicare levy to increase
Effective: 1 July 2019
The Medicare levy will increase by half a percentage point from 2.0 to 2.5 per cent of taxable income, including taxable benefits from super. The increase is to ensure that the National Disability Insurance Scheme is fully funded.
No other major superannuation changes were announced in Tuesday’s Budget; however it is worth keeping in mind that the super changes announced in last year’s budget are still to come into effect on 1 July this year. For more information on these changes, visit mediasuper.com.au/superchanges.
The full 2017-18 Budget is available at www.budget.gov.au.
We’re here to help
If you would like general advice or further information about how the budget may affect your super or pension, please contact your local Business Development Manager. They can help you over the phone or face to face.