Changes impacting super in the 2017-18 Budget
The major measures in the Federal budget released on 9 May that have a direct impact on superannuation include:
- new measures targeting housing affordability – a first home super saver scheme, super contributions from the proceeds of downsizing and a bond aggregator scheme for institutional investors
- complaints about superannuation to be handled by a new Australian Financial Complaints Authority (AFCA) from 1 July 2018
- refinement of the small business capital gains tax (CGT) retirement concessions
- an increase in the Medicare levy from 1 July 2019
Budget announcements are yet to be legislated and details could change as Bills are debated in the Parliament. For more details on the Budget go to www.budget.gov.au.
First Home Super Saver Scheme
First home super saver scheme: voluntary contributions accessible to fund a deposit
The government will allow first home buyers to withdraw future voluntary contributions to superannuation made from 1 July 2017. The amounts will be over and above any compulsory contributions and, together with associated deemed investment earnings, can be withdrawn for a first home deposit.
The measure will apply to voluntary contributions including:
- salary sacrificed contributions
- personal contributions from after-tax monies for which the individual claims a tax deduction, including under rules introduced in last year’s Budget and applying from 1 July 2017 (these are treated as concessional contributions)
- personal contributions from after-tax monies for which no deduction is claimed (these are treated as non-concessional contributions).
Other key aspects of the measure include:
- first home buyers can contribute up to $15,000 per year from 1 July 2017 and will be limited to $30,000 per person in total under the scheme
- concessional contributions and investment earnings will, while in the fund, continue to be taxed at 15 per cent
- withdrawals of concessional contributions and associated earnings will be taxed at the individual’s marginal rate, less a 30 per cent offset
- existing contribution caps will continue to apply
- 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.
The Australian Taxation Office (ATO) will administer the scheme and determine eligibility. The ATO will calculate release amounts based on information from funds and applicants and will instruct super funds to make payments. The ATO will also be responsible for compliance by applicants.
Downsizing the family home – contributing proceeds into superannuation
The government will allow individuals aged 65 years and over to make a non-concessional contribution of up to $300,000 ($600,000 for a couple) from the proceeds of selling their home, from 1 July 2018.
These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.
Sale proceeds contributed to superannuation under this measure will remain subject to the Age Pension assets test.
This measure will apply to sales of a principal residence owned for the past 10 or more years and both members of a couple will be able to take advantage of this measure for the same home.
National Housing Finance and Investment Corporation – bond aggregator scheme for institutional investors
The government will provide $63.1 million over four years from 2017–18 (including $4.8 million in capital) to the Department of the Treasury to establish the National Housing Finance and Investment Corporation (NHFIC).
The NHFIC will operate an affordable housing bond aggregator, to provide cheaper and longer term finance for community housing providers by aggregating their borrowing requirements and issuing bonds to the wholesale market at a lower cost and longer tenor than bank finance.
Establishment of the bond aggregator was foreshadowed by the government in March and is likely to present investment opportunities for superannuation funds as institutional investors.
New complaints handling body for superannuation and financial services
Over the last 12 months, an expert panel chaired by Professor Ian Ramsay has been conducting a review of the external dispute resolution (EDR) and complaints framework (Ramsay Review), including the effectiveness of the current EDR bodies and the merits of replacing them with a ‘one stop shop’.
The panel’s final report and the government’s response have been released as part of the Budget.
The government will replace the current EDR and complaints framework in financial services with a new dispute resolution framework from 1 July 2018.
The Superannuation Complaints Tribunal (SCT), Financial Ombudsman Service (FOS) and Credit and Investments Ombudsman (CIO) will be replaced with the new Australian Financial Complaints Authority (AFCA).
The AFCA will be an industry funded complaints resolution body for all financial and superannuation disputes. Australian Financial Services licensees will be required to be members of AFCA and its decisions will be binding on all firms.
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.
ASIC will be provided with stronger powers to oversee the new EDR body, including a general directions power to ensure AFCA complies with legislative and regulatory requirements.
Small business capital gains tax retirement concessions refined
The government will amend the small business capital gains tax (CGT) concessions, including the retirement concessions, to ensure they can only be accessed in relation to assets used in a small business or ownership interests in a small business.
An existing package of small business CGT concessions assists owners of small businesses by providing relief from CGT on assets related to their business, including by allowing small business owners to contribute to their retirement savings through the sale of the business.
However, the government has identified that some taxpayers are able to access these concessions for assets unrelated to their small business, for instance, through arranging their affairs so their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions.
The small business CGT concessions will continue to be available to small business taxpayers with aggregated turnover of less than $2 million or business assets less than $6 million.
The amendments will apply from 1 July 2017.
Medicare levy to increase
The government will increase the Medicare levy by half a percentage point from 2.0 to 2.5 per cent of taxable income – with effect from 1 July 2019. The increase is to ensure that the National Disability Insurance Scheme is fully funded.
This will impact the rates at which superannuation funds must withhold Pay As You Go tax from members’ benefit payments.
Other changes affecting pensioners
Pensioner concession cards to be reinstated
If you lost your pensioner concession card due to changes to Age Pension assets test changes introduced on 1 January 2017, the card will be reinstated, commencing 9 October 2017.
This means you can access Commonwealth subsidised hearing services and be eligible for pensioner concession cards and discounts in your State or Territory.
One-off Energy Assistance Payment
The Government will also be making a one-off energy payment to pensioners of $75 for singles and $125 for couples. This will be paid automatically before 30 June 2017.