Treasurer Mr Scott Morrison has handed down his second Federal Budget and in a complete contrast to last year, there are no unexpected surprises for superannuation.
Fund members, SMSF trustees and their advisers can all breathe a sigh of relief with the changes announced focussing largely on the Government’s housing aﬀordability
This provides stability and conﬁdence for all to continue to work towards having strategies in place to deal with the complex Superannuation Reforms coming into eﬀect on 1 July 2017.
Downsizing exemption to superannuation caps
From 1 July 2018, individuals aged 65 and over will be able to downsize their family home and place proceeds of up to $300,000 per member into their superannuation fund without breaching any of the current superannuation caps, work test and age restrictions.
The measure will apply to a principal place of residence held for a minimum of 10 years and both members of a couple will be able to take advantage of this for the same home.
This means that even if an individual has a Total Superannuation Balance of $1.6 million or more they will be able to make an after-tax superannuation contribution from the proceeds of their house sale and this will not count towards their annual non-concessional contribution limit.
By having no work test or age restrictions for this measure it also opens the door for members who are currently unable to make superannuation contributions, to potentially do so.
First Home Super Saver Scheme
In a boost to individuals saving for their ﬁrst home, from 1 July 2017 they will be able to make voluntary contributions to their existing superannuation fund, which along with deemed associated earnings, can be withdrawn from 1 July 2018 to help fund a ﬁrst home deposit.
Individuals are are able to contribute up to $15,000 per year but only to a total of $30,000 in contributions towards this scheme.
These contributions must also be within their existing concessional contributions cap of $25,000 from 1 July 2017.
For example, someone with concessional superannuation contributions of$14,000 in a year would only be able to make First Home Super Saver contributions of $11,000 that year.
Also, this is a per person initiative meaning that both members of a couple can take advantage of the measure to purchase a ﬁrst home together.
These contributions are taxed at 15 per cent when they are made and individuals who are self-employed or have employers who do not oﬀer salary sacriﬁce are able to claim a personal tax deduction for these contributions giving the same tax advantage.
Upon withdrawal to fund a house deposit, they are then taxed at the individual’s marginal rate less a 30 per cent oﬀset.
Integrity of Limited Recourse Borrowing Arrangements
The Government is proceeding with previously announced amendments to the transfer balance cap and total superannuation balance rules for Limited Recourse Borrowing Arrangements (LRBAs).
The outstanding balance of an LRBA will now be added back to determine a member’s annual Total Superannuation Balance.
This will be grandfathered and only applied to new LRBAs entered into once the legislation is passed.
These changes are generally positive and although whether they have a positive impact on housing aﬀordability is debatable, they do oﬀer some good news for both ﬁrst home buyers and retirees.
After the heavy restrictions that have been imposed on getting money into superannuation it is encouraging to see the Government giving opportunities for people to boost their superannuation to assist them to fund a secure and digniﬁed retirement.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.