Significant superannuation changes are coming into effect from 1 July 2017. Jon Black, Private Client Advisor, explains how you can take advantage of superannuation opportunities before the end of the financial year.
How Super was affected by the Federal Budget
With major reforms kicking off 1 July 2017, this year’s budget didn’t add any major items to the mix – no doubt a sigh of relief for all as everyone struggles with the complexity of what’s on its way.
Two items of note form part of the Government’s push on housing affordability, encouraging older Australians to downsize and enabling first home buyers to use super to crack the market.
Those over 65 will be able to top up their super by up to $300,000 each from the proceeds of the sale of their home. This new measure will not attract any special Centrelink treatment but it will allow eligible individuals to make contributions above the super caps, without being subject to work or age test requirements. The only catch is that you must have owned the home for more than 10 years. Surprisingly, it doesn’t appear that you actually need to downsize, and it can even be used by those that already have more than the mystical $1.6m threshold.
Enabling first home buyers
Since the early 90’s the Government has been encouraging (albeit often compulsorily) saving for retirement, reducing the reliance on welfare. The housing issues faced by first home buyers appears to have overtaken this priority.
From 1 July 2018, first home buyers will be able to withdraw voluntary super contributions that they have made (i.e. over and above any compulsory super), plus earnings on them, to assist with the deposit for the purchase of their first home. These voluntary contributions could come from additional salary sacrifice amounts, or non-concessional contributions, up to a maximum of $30,000 in total and $15,000 in a single year.
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Only contributions made after 1 July 2017 will be available and the existing contributions caps will remain in play limiting the amount that can be made.
The catch is that any concessional contributions withdrawn will be subject to tax, at their marginal tax rate, but with a 30% tax concession – so, you may have to pay a little extra to be able to buy that first home if you earn more than $37,000 p.a.
Some more integrity
The budget also contains some further integrity measures aimed at ensuring the upcoming super reforms are implemented as intended. This includes fine-tuning treatment of some related party transactions, but more importantly, seeking to include Limited Recourse Borrowing Arrangements in total super balances and transfer caps.
For further information regarding the changes, it is important to speak to your financial adviser who will look at your personal circumstances and assess how you will be affected and what action you can take. It’s important to note that these proposed measures are not yet law and may be subject to change.