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Budget 2017: Government uses super to tackle housing affordability

10 May 2017

From 1 July this year, eligible first home buyers will be able to use the advantages of super to save for a home deposit.

That’s according to a new measure handed down in the Federal Government’s 2017 Budget.

It’s one of two Budget measures where super and housing are involved, and while both are still subject to legislative approval the current details include:

The First Home Super Saver Scheme

In an effort to help Australians access the housing market, the Government is allowing first home buyers to make voluntary contributions into super in order to save for a home. They’ll be able to contribute up to $15,000 per year (and $30,000 in total) from 1 July this year, and can withdraw these savings (plus deemed investment earnings) from 1 July 2018, subject to ATO authorisation.

The benefit of making these contributions by salary sacrifice is that it may enable people to generate savings using super’s concessional tax rates. Contributions under this scheme will be taxed at 15% going into super. The contributions will also be subject to the concessional contribution cap of $25,000.

Withdrawals will be subject to approval from the Australian Tax Office (ATO) and will be taxed at the relevant marginal tax rate, less a 30% tax offset. The earnings amount will not reflect the super fund’s investment performance, but will be calculated using a deemed rate of return set by the Government.

It’s another way for members to use their super to build a better future.

Encouraging downsizing

To help release housing stock for families, the Government is encouraging Australians over age 65 to downsize their family home by enabling them to put up to $300,000 from the proceeds of the sale into super. For couples, each partner could invest up to $300,000 into super.

These proceeds won’t be affected by the cap on non-concessional (after-tax) contributions, opening super up as an extra investment opportunity for older Australians. It could also offer a way for these members to ‘catch up’ on their super later in life, as these contributions will not be subject to the 'work test' or other restrictions on making non-concessional contributions.

There are conditions attached to the proposal, including a requirement for the home to be the member's principal place of residence and to have been owned for at least 10 years.

Like other money in the retirement phase of super, individuals will be able to use these proceeds as an income stream to fund their retirement lifestyle. However, the $1.6 million transfer balance cap on money you can move into retirement phase pensions (being introduced on 1 July) will apply. Any excess will need to remain in an accumulation account but could be drawn down from there.

This measure will come into effect from 1 July 2018, pending legislative approval.

Other changes

Other measures that may interest super and pension members include:

  • The pensioner concession card will be reintroduced for retirees who lost their entitlement when the Age Pension assets test changed on 1 January this year.
  • The Superannuation Complaints Tribunal (SCT) will be absorbed into the new Australian Financial Complaints Authority, which will deal with all financial disputes, not just super.
  • The Medicare Levy will increase from 2% to 2.5%, effective 1 July 2019. This will affect tax calculations on benefits you receive.

What’s next?

CareSuper will keep you updated on whether these changes are legislated, how they will be implemented and what they could mean for you and your super.

If you have any questions, you can get in touch by calling 1300 360 149 or email admin@caresuper.com.au.

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