1. Older Australians selling their home and putting some of the proceeds into super
This is an important policy decision of the government and is a good start. Anyone selling their home after June 2018 will be able to contribute up to $300,000 of the proceeds into a super fund (or $600,000 for a couple). The precise timing of when the house can be sold (and how old you have to be when the proceeds are paid) and how long before the proceeds can be contributed into super are details that are yet to be fully determined. The important point about this policy is that the contribution can only be made once a person turns 65 and can be made without any reference to current work tests or age limitations.It will be a non-concessional contribution into super – that is, it will be made with after tax money.
It will be permitted without reference to a person’s Total Super Balance – that is, you can make this contribution regardless of how much you have in super. However these contributions may limit or prevent a person making further non-concessional contributions if the house-proceeds-contributions push your TSB above the $1.6 million cap.
The house contribution will then count towards a person’s $1.6 million Transfer Balance Cap if it is then used to commence a pension.
Tony Negline, Head of Superannuation at Chartered Accountants ANZ said: “This is clearly designed to encourage supply of housing by providing incentives to older Australians to sell their house. Time will tell if it will be successful.
“One downside with this policy announcement is that any proceeds will be counted towards Centrelink and DVA income and assets test.
“In addition some people may not be able to use the contribution to commence a pension if they have already exceeded their $1.6m Transfer Balance Cap.
“To encourage further take-up of this measure, these are all areas of reform that the government may need to consider in the near future,” said Mr Negline.
2. Super funds return as a first home savers vehicle
Super fund members will be permitted to contribute up to $15,000 in one year, or a total of $30,000 over their lifetime, as concessional and non-concessional contributions, and then withdraw these proceeds plus notional earnings and use the net proceeds towards a deposit on their first home.
The contributions must be made within existing contribution caps – for example the maximum concessional contributions that can be made are $25,000 from 1 July 2017 and from the same time the maximum annual non-concessional contributions is $100,000.
The ATO will administer this policy and will be the entity that authorises withdrawals from super funds for this purpose.
“This measure commences in July 2017 and is seeking to use the concessional super fund tax rate to help younger people save for a first home deposit at a faster rate than personal savings. This is a great idea for those without children earning about 60% of average weekly earnings (approx. $50,000 per annum). In time the government might consider ways to help those earning less than this amount to also tax-effectively save for a house deposit,” Mr Negline said.
3. Single External Dispute Resolution Scheme
The government has said that it has accepted all of the Ramsay Committee’s final report into setting up a single financial services EDRS.
From July 2018 the Super Complaints Tribunal and all other financial services EDRS will be rolled into the Australian Financial Complaints Authority (AFCA).
It will apply to super funds however at this stage it is unclear how this applies to Self Managed Super Funds.
The government is yet to consider if it will implement the last resort compensation scheme.
4. Non-arm’s length income integrity measure
The government will amend the income tax non-arm’s length income tests to “ensure expenses that would normally apply in a commercial transaction are included when considering whether the transaction is on a commercial basis.” (Source: Budget Paper No. 2)
This is an amendment to the income tax non-arm’s length income test rules. Currently this test is predominantly based around gross income. From July 2018 this will be a net income test.
5. Small business CGT concession rules
From July 2017 an integrity provision will be introduced to ensure that taxpayers can no longer access these concessions because they have arranged “their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions”. (Source: Budget Paper No. 2)
6. Extending the tax relief for APRA regulated funds to merge
This measure has been in place since December 2008 and was due to expire in June 2017. The government has elected to keep it open until June 2020.
“This is a good decision by the government because it removes any disincentive for super funds to merge,” he said.
"In our view we believe that some of the government’s announcements are the start of the reform process. We look forward to working with the government to progress these are other areas of reform.
“After tonight it remains our view that many of these announcements demonstrate the need for a comprehensive review of financial arrangements impacting retirement – in particular superannuation, taxation, aged care and social security – to ensure the whole system is fair, sustainable and fit for the long-term,” Mr Negline said.