Tag Archive: Budget

  1. Superannuation, SMSFs and the 2017-18 Federal Budget

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    Government delivers stability in 2017-18 Federal Budget

    Stability and confidence for superannuation is the good news coming out of the 2017-18 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes of the last Budget which take effect from 1 July 2017, this Budget’s minimal changes will result in a period for members to ensure they have the correct strategies in place.

    The main change impacting superannuation involves allowing people aged 65 and over to downsize their home and gain exemptions to superannuation caps, a First Home Super Saver Scheme and the rounding up of minor technical changes already announced.

    The key changes proposed for superannuation are:

    Downsizing exemption to superannuation caps

    From 1 July 2018, individuals aged 65 and over will be able to downsize their family home and place proceeds up to $300,000 per member into their superannuation fund without breaching any of the current superannuation caps, work test and age test. The measure will apply to a principal place of residence held for a minimum of 10 years. This means even if an individual has a total superannuation balance of $1.6 million or more they will not be restrained from making an after-tax contribution with their house proceeds. This exemption also extends to the annual after-tax contribution limit which is currently $100,000.

    First Home Super Saver Scheme

    Individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total to their superannuation to later withdraw to purchase a first home. Voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset. The measure will assist first home buyers to save a deposit for their home faster.

    Integrity of limited recourse borrowing arrangements

    The Government is proceeding with amendments to the transfer balance cap and total superannuation balance rules for limited recourse borrowing arrangements (LRBAs). The outstanding balance of an LRBA will now be included in a member’s annual total superannuation balance for all new LRBAs once this legislation is passed.

    Integrity of non-arm’s length arrangements

    The Government will amend the non-arm’s length income rules to prevent member’s using related party transactions on non-commercial terms to increase superannuation savings by including expenses that would normally apply in a commercial transaction.

    Other changes

    • The Government will reinstate the Pensioner Concession Card for pensioners who were no longer entitled to the pension following changes to the pension assets test from 1 January 2017.
    • The Government will introduce a major bank levy which will raise $6.2 billion in the next four years.
    • The Government will introduce a new single body external dispute resolution scheme for financial services from 1 July 2018.
    • The Medicare Levy will be increased from 2% to 2.5% from 1 July 2019.

    You can read more about the Federal Budget handed down on 9 May 2017 on the Australia Government’s official budget website – http://budget.gov.au/.

    How can we help?

    If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2017-18 Federal Budget, please contact us to discuss your particular requirements in more detail.

  2. Superannuation largely untouched in “tough measures” budget

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    Nearly 2 weeks after the Budget announcements, the news is ablaze with protests and opinions on the likelihood of the measures being legislated. But from a Superannuation perspective, it’s largely business as usual.

    Here’s our take:

    1. The government saw reason and has announced measures to allow Excess Non-Concessional Contributions to be withdrawn (along with any associated earnings) where a Non-Concessional Contribution Cap (eg $150,000 or $450,000 over 3 years) has been breached inadvertently from 1 July 2013.  This administrative issue has had the potential to bite plenty of people, and though SMSF members will benefit most from this change, public offer funds are still scrambling with how they’ll practically implement the relevant calculations if they need to.
    2. The mandated Superannuation Guarantee Contribution will still move to 9.5% in July before being frozen for 4 years.  The targeted 12% is set to kick in 2022 instead of 2019, but with at least 3 elections between now and then, there’s no guarantees on that.  Our Post Budget Ready Reckoner has the current and proposed increases laid out.
    3. And the most talked about item is that some self-funded retirees may exceed the Income Test for the Commonwealth Seniors Health Card.  Superannuation Pension Payments (that are untaxed for tax purposes) will be included in the Income Test for the first time from January 2015.  Current adjusted taxable income thresholds are:
      • $50,000 (singles)
      • $80,000 (couples, combined), or
      • $100,000 (couples, combined, for couples separated by illness or respite care).

    Note that all existing account based pensions in place prior to this date will be grandfathered.  Talk to us today if you’re over or nearing 65 and don’t have one in place. 

    For existing card holders, the Government will achieve savings of $1.1b over 5 years by ceasing the Seniors Supplement for holders of the CSHC (currently $876.20 per annum for singles and $1,320.80 combined for couples).  The Clean Energy Supplement will remain in place, as will a range of concessional benefits including lower co-payments for medicines on the Pharmaceutical Benefits Scheme and access to the lower threshold for the extended Medicare Safety Net.  The last payment will be made in June 2014.

    1. Though not specifically Super related, the Age Pension age was already set to increase to 67 by 1 July 2023.  Now, from 1 July 2025, the Age Pension qualifying age will continue to rise by six months every two years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035.  People born before 1 July 1958 will not be affected by this change. Also, there has been no change to the preservation age for accessing preserved superannuation benefits.  See our Post Budget Ready Reckoner for Age Pension eligibility dates.
    2. And in case you thought the Budget Repair Levy may apply to tax free income derived from a Superannuation Pension, it doesn’t.  However it has captured non-arms length income derived from SMSF Investments such as discretionary trust income, private company dividends or non-arms length transactions with related parties, increasing it from 45% to 47%.

    For a full super, tax and social security budget run-down, refer to Bendzulla’s Budget Report.

    Other important Super Strategies to consider right now

    Changes to the Concessional Contribution Caps were introduced prior to Budget Night and will come into effect on 1 July 2014.

    Year Aged under 59 @ 1/7/13 Aged 59 and over @ 1/7/13
    2013-14 (now) $25,000 $35,000
    Year Aged under 49 @ 1/7/14 Aged 49 and over @ 1/7/14
    2014-15 $30,000 $35,000

    But the big ticket item here is if you’re considering a Non-Concessional Contribution to get money into Superannuation right now, make sure you hold off until 1 July this year where possible.  The increased caps will enable you to contribute up to $90,000 extra by holding off.

    Year Limit per year* Over 3 years (referred to as “bring forward rule”)**
    2013-14 $150,000 $450,000
    2014-15 $180,000 $540,000

    *Annual limits applicable where under age 65, plus 65-74 where 40 hours in 30 day work test is met
    **Bring forward rule only applicable if age under 65So for now, it’s more about using Superannuation effectively to reduce your tax and ensure a well-funded lifestyle for the future.

    Talk to us today about a range of strategies to suit you  — Call now on 1300 368 775