Thankfully there were no major reforms announced for superannuation, especially as we will see reforms from last years’ budget come into effect on 1st of July 2017
However, we did receive additional confirmation of some measures as well as the introduction of minor reforms.
Super Borrowings included in pension cap
The use of limited recourse borrowing arrangements (LRBA) in super will be included in a member’s total superannuation balance and for the purposes of the $1.6m pension transfer cap from 1 July 2017.
This is an integrity measure to ensure members don’t circumvent the caps introduced in last year’s budget. The outstanding balance of an LRBA will be included in a member’s annual total superannuation balance. Repayment of the principal and interest of a LRBA from a member’s accumulation account will be a credit in the member’s pension transfer balance account.
Contribute to super when downsizing your home
If you’re aged 65 or older you will be allowed to make a non-concessional contribution of up to $300,000 after 1 July 2018 from the proceeds of selling your home. These contributions will be exempt from existing age tests, work tests and the $1.6m total superannuation balance test.
You will however have to have owned the principal residence sold for at least 10 years. If a you’re a couple both members of the couple can take advantage of the measure.
The measure is hoped to enable more effective use of existing housing stock by allowing older Australians to place these proceeds in a lower taxed environment (super). However, the proceeds are not proposed to be exempt from the Age Pension assets test.
First Home Saver Scheme
From 1 July 2017 first homebuyers will be able to salary sacrifice to super in order to save for housing. Up to $15,000 per year, capped at $30,000 in total can be contributed. Yearly contributions will be required to meet existing concessional contribution caps and taxed accordingly within the fund. You will be able to withdraw both the contributed funds and associated earnings from 1 July 2018 and these withdrawals will be taxed at your marginal rate less a 30% offset.
With the ongoing ‘tinkering’ to superannuation it will be interesting to see if this measure is embraced by first homeowners.