May 2017 Federal Budget – key implications for your super
AvSuper summarises the likely impact of the Federal Budget on your super and your retirement.
As always, we will keep members informed as things progress. If you have concerns about how these Budget changes may affect you, you can call us with your questions, or make an appointment with one of our professional Member Advice Consultants to obtain advice on your specific situation.
Michelle Wade Chief Executive Officer
Generally the announcements made as part of the Budget will have to pass as legislation before they take effect. Therefore, Budget proposals should not be taken as fact yet, even if a starting date is proposed.
Some Budget proposals have not yet been explained in detail by the Government and industry consultation on draft legislation will be required. The final legislation could therefore be different from what was announced during the Budget and start dates may be changed. As further details become available we will analyse their relevance to AvSuper and report to members as appropriate.
Contributing proceeds of home sales to super
From 1 July 2018, anyone aged over 65 years who sells their principle residence, owned for at least 10 years, will be able to contribute up to $300,000 of the proceeds of the sale into their super as non-concessional contributions.
Both members of a couple will be able to take advantage of this measure for the same home, so a total of $600,000 of contributions will be permitted per couple.
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. However, sale proceeds contributed to superannuation under this measure will be subject to the Age Pension assets test.
This change may allow older members to put additional money into super which may make downsizing the family home more appealing.
While adding the money to super may be beneficial, the impact on Centrelink entitlements may outweigh the financial advantages for some members. So please consider carefully and speak to one of our financial advisers before putting your home on the market.
First Home Super Saver scheme
The Government will seek to encourage home ownership by allowing individuals to make voluntary contributions to super, that can later be withdrawn to purchase their first home. Contributions can be made via salary sacrifice or personal after-tax contributions (whether claimed for a tax deduction or not) for this purpose. Up to $15,000 per year (and $30,000 in total) can be contributed by an individual, but the amounts contributed will count towards the person’s applicable contribution cap.
Withdrawals will be allowed after 1 July 2018 and will include any deemed earnings for those contributions. Where applicable, withdrawals of concessional contributions will be taxed at marginal tax rates less 30%.
This scheme will be administered by the ATO, who will confirm eligibility for release of savings and the amount that can be released. Super funds can only release money for first home buyers as directed by the ATO, and the ATO will be responsible for ensuring people do buy their first home with the amount withdrawn.
We expect this measure to lead to greater interest and engagement with younger AvSuper members with their super, which is welcome. However, we do foresee some potential challenges in its implementations. This remains one we will watch carefully, especially when the consultation with industry commences.
New one-stop complaints shop
From 1 July 2018, all financial services complaints will be heard by one industry-funded dispute resolution body – the Australian Financial Complaints Authority (AFCA) – rather than the existing three (including the existing Superannuation Complaints Tribunal for super related issues). The existing bodies will be wound down to and are expected to close by 1 July 2020
The Government has indicated that the new body is intended to be free and fast for complainants, and will be able to hear higher value disputes than are currently permitted under existing schemes, which is pleasing. While the new authority will be industry funded, no details of the applicable levies to be charged to super funds have yet been released.
Medicare levy to increase from 1 July 2019
From 1 July 2019, the Medicare levy will increase from 2% to 2.5% to fully fund the NDIS.
Note that all other tax rates linked to the top personal tax rates will also increase – including the Fringe Benefit Tax, super withdrawal tax rates (for people aged under 60), the tax rate for people not providing their Tax File Number (TFN) and the excess non-concessional contribution tax rate.
The change in Medicare levy and associated tax rates will impact the amount of PAYG tax we must deduct from any super withdrawals.
As always, we will keep members informed about any changes as things develop or become law, so be sure to watch our website and read our Annual Report.
Email: email@example.com | Freecall: 1800 805 088 | Phone: 02 6268 5073 | www.avsuper.com.au
This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS0001.9 05.2017