Budget 2017 : Superannuation
The use of the superannuation regime to provide incentives to resolve public housing issues is an interesting measure and one that will spark a lot of debate and interest.
Encouraging the over 65s to downsize
Date of effect: 1 July 2018
If you are 65 or over, the Government will allow you to make a non-concessional contribution of up to $300,000 from the proceeds of selling your home from 1 July 2018. This non-concessional contribution will be excluded from the existing age test, work test, and the $1.6 million balance threshold (but will not be exempt from the $1.6m transfer balance cap).
Interestingly, the Government is enabling “both members of a couple” to take advantage of the concession for the same home. So, if you have joint ownership of the property and meet the other criteria, both people can make a non-concessional contribution up to $300,000 ($600,000 per couple).
The measure will apply to sales of a principal residence owned for the past ten or more years.
Sale proceeds contributed to superannuation under this measure will count towards the Age Pension assets test.
First home owners to use super contributions to save for a deposit
Date of effect: 1 July 2017 – contributions
1 July 2018 – withdrawals
Under the First Home Super Savers Scheme, would be first home owners will be able to withdraw voluntary contributions they make to super for a deposit. In practice, first home buyers will be able to save for a deposit by salary sacrificing into their superannuation fund over and above their normal compulsory superannuation contributions.
If the individual is self-employed or their employer will not allow contributions to be salary sacrificed the Government will allow these people to claim a deduction for voluntary contributions made under the scheme.
The Government will allow future voluntary contributions to superannuation made by first home buyers from 1 July 2017 to be withdrawn for a first home deposit, along with associated deemed earnings. The earnings that can be released will be calculated using a deemed rate of return based on the 90-day Bank Bill rate plus 3 percentage points (the same way the Shortfall Interest Charge is calculated).
Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30% offset. Combined with the existing concessional tax treatment of contributions and earnings, this is intended to provide an incentive that will enable first home buyers to build savings more quickly for a home deposit. In reality, the benefits of using the scheme could be relatively small for those on low income levels as salary sacrificing arrangements and additional deductions tend to be much more beneficial for those on higher incomes.
Under the measure, up to $15,000 per year and $30,000 in total can be contributed within existing caps. Withdrawals will be allowed from 1 July 2018 onwards. Both members of a couple can take advantage of this measure to buy their first home together.
It will be interesting to see how popular this scheme is with first home buyers. Some individuals may be wary of contributing additional funds into superannuation especially if they are not absolutely confident that they will be able to save a deposit for a home in the near future.
Tax relief extended for merging super funds
Date of effect: Extension of existing relief until 1 July 2020
The current tax relief for merging superannuation funds will be extended until 1 July 2020.
Since December 2008, tax relief has been available for superannuation funds to transfer capital and revenue losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets. This tax relief was due to lapse on 1 July 2017.
Crackdown on related party transactions
Date of effect: 1 July 2018
The Government is concerned that related party transactions on non-commercial terms are being used to increase superannuation savings.
As a result, the non arm’s length income provisions will be amended to ensure expenses that would normally apply in a commercial transaction are included when considering whether the transaction is on a commercial basis.
SOURCE: Knowledge Shop
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DISCLAIMER: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
