2017 Federal Budget and Year End Tax Planning
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.
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- voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset
- 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
Year end tax planning – what does your SMSF administrator need to know?
With another financial year end just around the corner now is the time to take a look at your SMSF to see if it’s ready for 30 June. Here is a quick checklist of what we need to know as your fund administrator:
- Do you have any other superannuation outside of your SMSF?
- it is crucial we are made aware of this as this can impact your fund under the new super reforms commencing 1 July 2017 (eg. do you have an industry, retail or defined benefit super fund)
- if you are unsure whether you have any lost super you can check under your “myGov” login. More information can be found at: https://www.moneysmart.gov.au/superannuation-and-retirement/keeping-track-and-lost-super
- Will your June 2017 salary sacrifice contribution be made in June or July 2017?
- If the June and/or any previous month’s salary sacrifice contribution will be paid into your fund in July 2017, this will be counted towards the 2017/18 concessional contribution cap of $25,000 (for all ages) and not the current year cap
- Do you have insurance premiums being paid by your employer from another fund that is not your SMSF?
- if so then these are counted towards your concessional cap
- Are your death benefit nominations up-to-date?
- as superannuation generally does not automatically form part of your estate, it is important to ensure your SMSF has current death benefit nominations in place
- Does your employer have the correct Electronic Service Address (“ESA”) for SuperStream?
in order for your SMSF to receive contribution data from your employer, they need the correct ESA for their payroll system