Federal Budget 2017: The wrap up
What's changing, and what you need to know
The Government largely left superannuation untouched in this year’s Budget. Read on to find out what’s changing, what it means for you, and what our investment experts think of the proposed changes.
Remember, the changes to superannuation are just proposals until they pass through Parliament.
1. Saving for your first home? Use voluntary super contributions to save for a deposit faster
A new First Home Super Saver Scheme will help Australians boost their savings for their first home by allowing them to save for a deposit inside superannuation. From 1 July 2017, individuals will be able to make voluntary super contributions of up to $15,000 per year and $30,000 in total to purchase a first home. These contributions, which are taxed at 15 per cent if they are made as salary sacrifice contributions, can be withdrawn for a housing deposit along with deemed earnings. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset, and allowed from 1 July 2018. Withdrawals will be managed via the Australian Tax Office.
WHAT DOES THIS MEAN FOR YOU?
For most people, the First Home Super Saver Scheme could boost the savings you can put towards a deposit by at least 30 per cent, compared with saving through a standard deposit account. This is due to the concessional tax treatment within superannuation.
The Government has provided an online estimator to help you understand the advantages of saving for a home deposit through superannuation.
|CASE STUDY: Boosting Michelle and Nick’s first home deposit |
Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund.
After three years of making those contributions, she is able to withdraw $27,380 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30 per cent offset. After paying $1,620 of withdrawal tax she has $25,760 that she can use for her deposit.
Michelle has saved around $6,240 more for a deposit than if she had saved in a standard deposit account. Michelle’s partner Nick has the same income and also salary sacrifices $10,000 annually to superannuation over the same period. Together they have $51,520 that they can put towards a deposit, $12,480 more than if they had saved in a standard deposit account.
2. Thinking of downsizing?
Up to $300k of sale proceeds can be moved into your super. The Government is relaxing restrictions on after-tax super contributions by rewarding older Australians who choose to downsize their home with the ability to move some of the proceeds into super.
From 1 July 2018, people aged 65 and over will be able to make a non-concessional (after-tax) contribution into their super of up to $300,000 (a total of $600,000 for couples) from the proceeds of selling their home.
WHAT DOES THIS MEAN FOR YOU?
If you’re 65 or older, this proposed change will give you more flexibility when it comes to investing the proceeds of the sale of your home.
The $300,000 contribution will be treated separately to the current $100,000 annual non-concessional contribution cap and the current limit on non-concessional contributions for members who have reached a $1.6 million balance.
Only principal places of residence that you have owned for more than 10 years will be eligible, and changes in your super balance as a result of this measure will count towards the Age Pension assets or income means tests.
|CASE STUDY: Helping John and Sarah downsize|
John and Sarah, who are still working part-time at age 65, decide to sell their large family home after all the children move out. The sale proceeds are $1.4 million. They are both able to make a non-concessional contribution of $300,000 ($600,000 in total) into superannuation. This is regardless of how much they have in their accounts already. They may also be able to make additional contributions to their superannuation using the sale proceeds under standard contribution arrangements.
3. Pension age? The pensioner concession card is back
If you were impacted by the Age Pension assets test changes introduced earlier this year, you will be glad to learn that the Government proposes to bring back the pensioner concession card.
The changes introduced in January this year impacted around 92,000 people, with the assets test limit dropping from $793,750 to $542,500 for singles and from about $1.1 million to $816,000 for couples.
WHAT DOES THIS MEAN FOR YOU?
This means more people will have access to state and territory based concessions that were withdrawn at the time the government introduced tighter assets test rules.
The pensioner concession card gives recipients discounts on essential goods and services like medicines, hearing services, public transport fares, vehicle registration and property rates.
4. Where to from here?
This summary covers the important proposals VISSF believes are most likely to affect superannuation investors. This information can be complex, so we encourage you to get in touch with the VISSF Advice Team or your financial adviser if you’d like to know more.
Tax time isn’t far away, so it’s also worth taking a few minutes to understand what’s due to change on 1 July 2017, and think about what you might need to do to differently to manage your super in the 2017/18 financial year.
If you have further questions you can call us on 1300 660 027 between 8am and 5pm weekdays.
This information is issued by the Trustee of The Victorian Independent Schools Superannuation Fund (ABN 37 024 873 660, RSE Registration number R1000436, MySuper Authorisation 37024873660599) VIS Nominees Pty Ltd (ABN 11 006 586 367 Australian Financial Services Licence number 235097. Registrable Superannuation Entity Licence number L0000321). It contains general advice only. In preparing this information, the Trustee has not taken into account your objectives, financial circumstances or needs. Before making any financial decisions, you should consider your personal circumstances and seek appropriate independent advice. The individual case study samples are for illustrative purposes only.