The 2017-18 Federal Budget brings stability and confidence to superannuation, particularly with the SMSF investment strategy. With SMSF members still working through the wide-reaching and complex superannuation changes of the last Budget, which took effect on 1 July 2017, this Budget’s minimal changes will result in a period for members to ensure they have the correct strategies in place.
The main change impacting superannuation involves allowing people aged 65 and over to downsize their home and gain exemptions to superannuation caps, a First Home Super Saver Scheme and the rounding up of minor technical changes already announced.
Key changes proposed for superannuation
- Downsizing exemption to superannuation caps:
- from 1 July 2018, 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
- the measure will apply to a principal place of residence held for a minimum of 10 years
- as such, this exemption also extends to the annual after-tax contribution limit, which is currently $100,000, so 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
- First Home Super Saver Scheme:
- 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
- voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset
- The integrity of limited recourse borrowing arrangements
- the Government is proceeding with amendments to the transfer balance cap and total superannuation balance rules for limited recourse borrowing arrangements (LRBAs) whereby the outstanding balance of an LRBA will now be included in a member’s annual total superannuation balance for all new LRBAs once this legislation is passed.
Kreston Stanley Williamson Team
*Correct as of May 2017
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