WA Super News
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. (see below for further details).
There were no other major superannuation changes announced, though it is worth keeping in mind that most of the 12 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.
For super members
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home buyers build a housing deposit, the Government proposes to allow voluntary contributions to super funds to be withdrawn for the purposes of buying a first home.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.
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 Cost: $250 million.
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 Cost: $30 million
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.
Effective: Immediately Cost: $3.1 million
Extension of tax relief for merging funds
The Government will extend the current tax relief for merging superannuation funds until 1 July 2020. This relief will continue to ensure that superannuation fund members’ balances are not reduced by tax when superannuation funds merge. It will remove tax as an impediment to mergers and facilitate industry consolidation. Consolidation should lead to better retirement outcomes through reduced costs as members of merged funds are better able to realise the benefits of economies of scale.
Effective: Immediately Cost: Not provided
New Financial Complaints Authority for consumers
The Government is proposing 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 still continue.
Effective: 1 July 2017 Cost: $4.3 million
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 Cost: $24 million
If you have any questions about the budget or WA Super in general, contact us today.
This information was prepared in May 2017 by the Australian Institute of Superannuation Trustees (AIST) ABN 19 123 284 275. This document is of a general nature and does not take into account your personal objectives, situation or needs.