2017 Federal Budget Update
The government’s annual Budget was delivered on 9 May 2017. The Budget contained only a small number of proposals that will impact on superannuation and retirement incomes. Please note that these are proposals only at this stage and are not yet law.
First home super saving scheme
The government is proposing to allow first home savers to make voluntary contributions to super that can then be withdrawn for a first home deposit.
Voluntary contributions of up to $15,000 per year, up to $30,000 in total (per person) can be made via salary sacrifice or after-tax contributions, from 1 July 2017. Normal contributions tax and contribution cap rules will apply to these contributions.
Withdrawals of these contributions (plus a specified rate of earnings), to fund a first home deposit will be allowed from 1 July 2018 onwards. Withdrawals of after-tax contributions will be taxed at a person’s marginal tax less a 30% offset, while withdrawal of salary sacrifice contributions will not be taxed.
The ATO will calculate the amount that can be withdrawn and will provide release instructions to super funds.
Downsizing the home and making super contributions
From 1 July 2018, the government will allow those aged 65 and over to make an additional personal contribution of up to $300,000, from the proceeds of selling their home. The home must have been owned as the person’s principle residence for at least 10 years.
The down-sizing contribution allowed is on top of the existing contribution caps, and the work test requirements and contribution age restrictions will not apply.
The contribution limit is per person, so a couple could contribute up to $600,000.
Medicare Levy increase
From 1 July 2019, the government will increase the Medical Levy from 2% to 2.5% of taxable income, to fully fund the National Disability Insurance Scheme. This will impact PAYG tax deducted from super benefit payments.
*This document contains general information only and has been prepared without taking into account your financial objectives, situation or needs. It may, therefore, not be right for you. Before you make any investment decision, we suggest you consult Nationwide Super’s Product Disclosure Statement and/or seek licensed financial advice.
As at the time of compilation, the information contained in this document is correct and any estimates, opinions, conclusions or recommendations are reasonably held or made. Subsequent events may mean that the information becomes out-of-date and so, to the maximum extent permitted by law, we disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this document.
Please note that this summary is not an exhaustive list of Federal Budget announcements and that all announcements are proposals only and are not yet law as at the time this article was prepared.