Government delivers stability in 2017-18 Federal Budget
Stability and confidence for superannuation is the good news coming out of the 2017-18 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes of the last Budget which take effect from 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.
The key changes proposed for superannuation are:
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. 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. This exemption also extends to the annual after-tax contribution limit which is currently $100,000.
“Stability and confidence for superannuation is the good news coming out of the 2017-18 Federal Budget.”
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 Voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset.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 measure will assist first home buyers to save a deposit for their home faster.
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). 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.
Integrity of non-arm's length arrangements
The Government will amend the non-arm’s length income rules to prevent member’s using related party transactions on non-commercial terms to increase superannuation savings by including expenses that would normally apply in a commercial transaction.
Other changes
- The Government will reinstate the Pensioner Concession Card for pensioners who were no longer entitled to the pension following changes to the pension assets test from 1 January 2017.
- The Government will introduce a major bank levy which will raise $6.2 billion in the next four years.
- The Government will introduce a new single body external dispute resolution scheme for financial services from 1 July 2018.
- The Medicare Levy will be increased from 2% to 2.5% from 1 July 2019.
“From 1 July 2018, individuals aged 65 and over can downsize their family home and place proceeds up to $300,000 per member into superannuation without breaching caps.”
How can we help?
If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2017-18 Federal Budget, please feel free to give Martin van der Saag or Cayle Petritsch a call.
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@nac.com.au
Cayle Petritsch
SMSF Specialist Advisor
T: 02 9984 7774
E: caylep@nac.com.au
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Superannuation received stability-focused changes rather than broad structural reform.
The 2017-18 Budget largely maintained existing super rules, with targeted updates designed to give individuals time to adapt.
New downsizer contribution rules aim to help older Australians transition from the family home.
From mid-2018, those aged 65+ can contribute up to $300,000 from home sale proceeds into super without breaching caps.
The First Home Super Saver Scheme encourages first-home buyers to save more efficiently.
This measure lets individuals build a deposit inside super and benefit from concessional tax treatment when withdrawing for a home purchase.
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Frequently Asked Questions
What was the overall theme of the 2017-18 Federal Budget?
The Budget was oriented toward stability and confidence, particularly in the superannuation system, with mostly minimal changes to allow individuals and advisers time to implement existing strategies.
What is the downsizing contribution exemption?
From 1 July 2018, individuals aged 65 and over who have owned their principal residence for at least 10 years can contribute up to $300,000 per member from the sale proceeds into superannuation without breaching contribution caps, regardless of their total super balance.
What is the First Home Super Saver Scheme proposed in the Budget?
The First Home Super Saver Scheme allows individuals to make voluntary contributions to superannuation (up to $15,000 per year and $30,000 in total) to build a deposit for their first home. Withdrawn amounts will be taxed at marginal rate less a 30% offset.
How does the Budget address limited recourse borrowing arrangements (LRBAs)?
The Budget proposes that for new LRBAs, the outstanding balance will be included in a member’s total superannuation balance once legislation is passed — affecting how caps and thresholds apply.
What other notable measures were included in the Budget?
Other significant measures include reinstating the Pensioner Concession Card for those affected by the assets test, introducing a major bank levy, establishing a single external dispute resolution body, and increasing the Medicare Levy from 2% to 2.5% from 1 July 2019.
Who would benefit most from the stability in this Budget?
The article specifically highlights SMSF members, who may use the period of stability to review and adjust their super strategies.
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