The Budget for 2017/2018 has not had a large impact on SMSFs compared to the previous year.
The following guide designed to provide you with a summary of the measures affecting SMSFs and what it means for SF360. The full impact of these will now be known until the draft legislation is released.
Housing Affordability - Downsizing exemption to superannuation caps
| Start Date |
1 July 2018 |
| Intent |
This measure is designed to encourage some people to downsize into housing that is more suitable to their needs, freeing up larger family homes.
It will assist people aged 65 and over who are currently unable to contribute all or any proceeds of the sale of their home into superannuation because of the existing restrictions and caps.
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| Summary |
- 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.
- This will allow a couple to contribute up to $600,000 from the sale of their home to superannuation outside of the existing caps and balance restrictions.
- 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.
- Only people who have remaining transfer balance cap space will be able to convert their contributions into a pension phase account where earnings are tax-free.
- This exemption also extends to the annual after-tax contribution limit which is currently $100,000.
- Any change in the person's superannuation balance as a result of this measure will count towards the Age Pension assets test.
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| Example 1 |
George and Jane, both retired and aged 76 and 69, sell their home to move into more appropriate accommodation. The sale proceeds are $1.2 million. They can both make a non-concessional contribution into superannuation of $300,000 ($600,000 in total), even though Jane no longer satisfies the standard contribution work test and George is over 75. They can make these special contributions regardless of how much they already have in their accounts. |
| Example 2 |
John and Sarah, who are still working part-time at age 65, decide to sell the large family home after all the children move out. The sale proceeds are $1.4 million. They are both able to make a non-concessional contribution of $300,000 ($600,000 in total) into superannuation. This is regardless of how much they have in their accounts already. They may also be able to make additional contributions to their superannuation using the sale proceeds under standard contribution arrangements. |
| Potential Impact on SF360 |
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Housing Affordability - First Home Super Saver Scheme
| Start Date |
1 July 2018 |
| Intent |
The measure will assist first home buyers to save a deposit for their home faster. |
| Summary |
- 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.
- These contributions, which are taxed at 15 per cent, along with deemed earnings, can be withdrawn for a deposit.
- Voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset.
- Voluntary contributions under this scheme must be made within existing superannuation caps.
- Non-concessional contributions can also be made within the scheme. While these contributions will not benefit from a tax concession, earnings on these contributions will benefit from the concessional rate of tax in superannuation and the higher returns often realised inside superannuation.
- When non-concessional amounts are withdrawn, they will not be taxed.
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| Potential Impact on SF360 |
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Integrity - limited recourse borrowing arrangements (LRBAs)
| Start Date |
1 July 2018 |
| Intent |
The measure is designed to improve the integrity of the superannuation system |
| Summary |
- The Government will make 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
- The repayment of an LRBA from a member’s accumulation account will be a credit in the member’s transfer balance account.
- Exposure Draft legislation was released on 27 April 2017
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| Potential Impact on SF360 |
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Integrity - Non-Arm’s Length Arrangements
| Start Date |
1 July 2018 |
| Intent |
Improve the integrity of the superannuation system by reducing opportunities for members to use related party transactions on non-commercial terms to increase superannuation savings. |
| Summary |
- Amend the non-arm’s length income rules to prevent members using related party transactions on non-commercial terms to increase superannuation savings.
- Ensure that expenses that would normally apply to a commercial transaction are included when considering whether the transaction is on a commercial basis.
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| Potential Impact on SF360 |
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Deduction removed for property investors
| Start Date |
1 July 2018 |
| Intent |
Improve the integrity of negative gearing |
| Summary |
- Disallow deductions for travel expenses related to owning a residential investment property.
- Limit plant and equipment depreciation deductions to only expenses directly incurred by investors for properties purchased after 9th May 2017
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| Potential Impact to SF360 |
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Bank Data - Reducing regulatory barriers to new FinTech entrants
| Start Date |
1 July 2018 |
| Intent |
The Government will increase consumer choice and improve competition in banking by giving customers access to and control over their banking data by introducing an open banking regime in Australia. |
| Summary |
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Increased access to data will improve the information available to consumers and better enable innovative business models to create new products tailored to individuals.
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The Government will commission an independent review to recommend the best approach to implement the open banking regime to report by the end of 2017.
- Australia’s banks will be forced to share the data they hold on a customer when requested by that customer
- First raised in Review of the Four Major Banks in 2016
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| Potential Impact to SF360 |
It is unknown at this stage but we hope it leads to
- Further competitive Interest rates for SMSF accounts
- All Bank Feeds can be authorised online
- A Bank Feed will be available for all institutions
- Transaction History will be available for all institutions
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