Adviser Update

2017-18 Budget Update

Last night the Federal Treasurer, The Hon Scott Morrison MP, handed down the 2017-18 Federal Budget. The budget announcement covered a range of proposed changes and initiatives including:
•    Contributing up to $300,000 of proceeds from downsizing to superannuation
•    First Home Super Saver Scheme
•    Levy on major banks
•    Enhanced powers for APRA
•    New Financial Complaints Authority
•    Support for impact investing
•    Reinstatement of pensioner concession card
•    New residency requirements for pensioners
•    Tax integrity changes – mostly SMSF related

Below is some more details on the Superannuation and other relevant measures:

Downsizing into superannuation

Retirees aged 65 and over who downsize their homes will be able to contribute up to $300,000 of the proceeds into superannuation as a non-concessional (post-tax) contribution.
This applies to people who sell their main residence having owned it for at least 10 years. Couples will be able to use it for the same home, making contributions of up to $300,000 each.
This will be allowed in addition to existing super rules and caps, including the total super balance cap of $1.6 million. The measure is not exempt, however, from the $1.6 million transfer balance cap (which limits the amount of money you can put into a pension phase account where the earnings are tax free). Any amounts over the balance limit will need to stay in the accumulation phase. The measure is exempt from the work test.

First Home Super Saver Scheme

In a move aimed at helping first home buyers build a housing deposit, the Government proposes to allow voluntary contributions to super funds to be withdrawn for the purposes of buying a first home. Contributions into a super fund will be allowed by salary sacrifice up to a maximum of $15,000 per year to a maximum of $30,000 in total. The scheme does not impact on compulsory super contributions.
Withdrawals will be allowed from 1 July 2018 onwards, with a concessional tax applying to withdrawals (along with a deemed earning rate that the Australian Tax Office applies). This concessional tax will be at a rate of marginal tax rates less a 30 per cent offset – effectively making withdrawals tax-free for anyone earning up to $87,000.

Levy on major banks
The Government has proposed a levy on major banks with liabilities greater than $100 billion. This levy will raise $6.2 billion over four years. Super funds and insurance companies will not be subject to this levy.

Enhanced powers for APRA

APRA will be given stronger powers to remove and disqualify senior executives and directors. These powers will apply to all institutions regulated by APRA. The Government will also provide an additional $28.6 million in funding (over four years) for APRA to undertake new regulatory activities. This increase in funding will be partially offset by at $26.8 million increase (over four years) to the Financial Institutions Supervisory Levies collected by APRA.

New Financial Complaints Authority

The Government has agreed with recommendations in the Ramsay and Coleman Reports that there should be a single External Dispute Resolution (EDR) scheme to replace the Financial Services Ombudsman, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. While AIST had supported a stand-alone tribunal for super fund members, the Government has agreed that the existing statutory protections applying to superannuation disputes will be provided in this new authority. The existing dispute resolution bodies will continue to operate after 1 July 2018 to work through their existing complaints.

Support for impact investing

The Government will establish the National Housing Finance and Investment Corporation (NHFIC) to operate an affordable housing bond aggregator aimed at providing cheaper and longer term finance for community housing providers by aggregating their borrowing requirements and issuing bonds to the wholesale market at a lower cost and longer tenor than bank finance. This could provide investment opportunities for super funds and other investors.

Support for the elderly

$5.5 billion in funding over two years has been allocated for meals on wheels and home support services for the elderly. The Commonwealth Home Support Program and Regional Assessment Service  –  both of which help elderly people live at home longer – are expected to stay open until at least 2020-21. $33 million in funding over three years has been allocated to help the increase the number of workers in aged care.

Reinstatement of pensioner concession card

This measure reinstates the pensioner concession card for retirees who lost their entitlement to the card when changes to the Age Pension assets test came into effect at the start of this year.

New residency requirements for Age Pension

New residency requirements for those claiming the Age Pension and the Disability Support Pension will come into effect on 1 July, 2018. From this date, anyone claiming either pension will need to have 15 years of continuous Australian residence unless they have either 10 years continuous Australian residence, with five years of this residence being during their working life (16 years of age to Age Pension age); or 10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of five years.

Tax integrity changes

The Government has introduced measures to tighten loopholes in limited recourse borrowing arrangements.  There is concern that these arrangements can be used to circumvent the new contribution caps announced in last year’s budget. This measure mostly relates to the self-managed super sector.

Support for impact investing

The Government will establish the National Housing Finance and Investment Corporation (NHFIC) to operate an affordable housing bond aggregator aimed at providing cheaper and longer term finance for community housing providers by aggregating their borrowing requirements and issuing bonds to the wholesale market at a lower cost and longer tenor than bank finance. This could provide investment opportunities for super funds and other investors.

For More Information 

If you would like any further information on the content of this adviser update, please  contact Terry Constable, Business Development Manager on (07) 3228 2632 or terry.constable@amgsuper.com.au.

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