The 2017 Federal Budget. Super ideas for housing?
Superannuation | 11/05/2017 |
3 min read
At first glance, the concepts of a First Home Super Saver Scheme and a plan to remove hurdles for older Australians to downsizing their home are exciting initiatives to address the nation’s housing affordability challenges.
These are the two standout announcements in the 2017 Federal Budget in relation to superannuation, but they are another example of how the devil in the detail may dampen the enthusiasm some fund members thinking about taking advantage of them.
Let’s take a quick look at the two proposals which, it should be noted, are still to navigate the Parliament before they can take effect:
First Home Super Saver Scheme
This announcement comes off the back of massive community debate about the merits of allowing younger people to access their super to gain entry to Australia’s inflated residential real estate market.
Let's look at it more closely.
1. The government proposes that people are able to access super contributions over and above the mandatory 9.5% paid by their employer from 1 July 2017 to help fund a first home purchase.
2. Eligible contributions will include salary sacrifice and/or other voluntary contributions paid into super.
3. Any additional contributions made prior to 1 July 2017 will not be included in the scheme and therefore unavailable for home purchases.
4. Eligible contributions of up to $15,000 per annum will be included in the overall annual concessional contributions cap of $25,000. In other words, for those members with high savings capacity, the home savers contributions are not additional to the maximum they could make previously.
5. Home savers will be allowed to withdraw up to $30,000 for their first home purchase, with withdrawals from concessional (employer) contributions taxed at their marginal tax rate less 30% and any non-concessional (voluntary) contribution components tax-free.
Note that, while the government proposes that additional super contributions from 1 July 2017 will be eligible for the scheme, it suggests the first withdrawals for home purchases will only be allowed from July 2018.
It is important to note that the final details are still to be ironed out. And while there is a proposal for the calculation of investment earnings paid out on contributions used for the home purchase, there are still some areas requiring clarification.
In his budget reply, Opposition Leader, Bill Shorten, said Labor would oppose the scheme's introduction.
Saving for a first home through super. A good idea? Tell us in our quick 5 question survey!
Super and home downsizing for seniors
This is an interesting development, with Rice Warner’s analyst, Stephen Freeborn*, suggesting that the real beneficiaries will be wealthier Australians, who will from 1 July 2017 effectively be able to use it as vehicle for moving additional money into the concessionally taxed superannuation investment environment.
He was talking about the government’s proposal to allow people aged 65-plus to make a non-concessional contribution of up to $300,000 into their super from the proceeds of selling their home. For couples, it enables payment of $300,000 each.
The good news for all is that the proposal removes the requirement for people in this age group to pass the ‘work test’ as a pre-requisite for making contributions to super.
According to Freeborn: “For the masses, it is not a good idea. A couple owning a home and with other assets including superannuation of $350,000 would be eligible for a full Age Pension of $34,800. If they capitalise $600,000 and put it into superannuation (or the bank), they lose the whole pension. While they will start getting a part pension later as they spend their assets, the pain is likely to be too great to endure.”
Once this proposal is legislated, we recommend that any members considering this option should discuss it with their financial planner to fully understand the pros and cons.
Some get their Pensioner Concession Card back
As many retirees would know, the tightening of the assets test from 1 January 2017 caused grief for some who either received a reduced government age pension or lost all their pension. As a by-product of that, those who lost the age pension also lost their entitlement to the Pensioner Concession Card.
The 2017 Budget removes the link between eligibility for the age pension and the card, meaning around 92,000 retirees who lost the entitlement will see it restored, giving them access to a range of medical and services concessions.
* Yet More Budget Changes to Superannuation, Stephen Freeborn, Rice Warner, 10 May 2017.