Must know changes to Superannuation

On 9 May 2017, Treasurer Scott Morrison released the 2017-18 Federal Budget. Due to the changes taking effect 1 July 2017, which arose out of the last budget (discussed here), most changes announced were rather minor.

Here’s a brief summary of the most exciting changes proposed in regards to Superannuation.

Contributing proceeds from downsizing to superannuation for those over 65

From 1 July 2018, any Australians aged at least 65 will be able to make a non-concessional contribution of up to $300,000 ($600,000 for a couple) using the money from the proceeds of selling their family home, either downsizing or upsizing. These contributions will be exempt from the present age test, work test or the $1.6 million balance test and will be in addition to those currently permitted under existing rules and caps. However, you need to have owned your home for 10 years or more, and it must be your principal place of residence.

First Home Super Saver Scheme

From 1 July 2017, non-concessional contributions as well as voluntary concessional contributions (salary sacrifice and self-employed) to superannuation can be made by first home buyers from their before-tax pay to save for a house deposit. Those contributions will count towards the new annual $25,000 concessional contributions cap and will also be subject to a limit of $15,000 per year and $30,000 per person. Any withdrawals of the contributed amount, along with associated deemed earnings, can be made from 1 July 2018, and will be taxed at your marginal tax rate less a 30% offset. The ATO will be the authority to assess and decide on how much can be released from the fund. More detail on the exact nature of the scheme will be forthcoming once legislation is drafted.

Superannuation Borrowing Arrangements

From 1 July 2017, a person’s superannuation balance may be affected by the borrowing arrangements entered into by his/her/their superannuation fund. Draft legislation has been recently released to ensure the Limited Recourse Borrowing Arrangements (LRBA) will be counted toward and included in the member’s Total Super Balance and Transfer Balance Account. Therefore, the effect of this measure will be to increase the total super balance if you have a limited recourse borrowing arrangement in place.

Non-Arm’s Length Expenses

From 1 July 2018, there will be some amendments in the existing non-arm’s length provisions to ensure ordinary expenses that would normally apply in a commercial transaction are included when considering whether a transaction is on a commercial basis. The purpose of this integrity measure is to minimise the opportunities to take advantage of related party transactions on non-commercial terms.

Please be advised that some of these announcements are yet to be legislated and care should be taken before implementing a financial strategy based on Budget Announcements alone.

If you are wanting to learn more about how to maximise the size and tax-effectiveness of your superannuation benefits, or you want to speak with someone who can help educate you on what superannuation arrangements and investment strategies might be appropriate for you, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email info@ugc.net.au to learn more.

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The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs. When assessing any investment you should also consider that past performance is not a reliable indicator of future performance