The Government delivered the 2017/18 Federal Budget in May 2017, with incentives to invest in super to reduce the pressure on housing affordability, explains Byron Smith.
Among the key take outs from the Federal Budget (the ‘Budget’) – the Government has announced that first-home buyers get a tax break to save in their super, most of us will be paying more for Medicare and the Budget will return to surplus in several years.
In short, the two main measures affecting superannuation account holders are that:
Perhaps the most critical measure is the First Home Super Savers Scheme, where savers can contribute from their before-tax income into their superannuation fund, and be taxed at the 15% superannuation tax rate instead of their marginal tax rate. When funds (including earnings) are withdrawn from a First Home Super Savers Scheme account to purchase a home they’ll be taxed at the marginal rate less a 30% tax offset.
First-home savers can contribute up to $15,000 a year under this scheme to a maximum of $30,000 per person, which will be $60,000 for a couple. The Treasurer concluded that “under this plan, most first-home savers will be able to accelerate their savings by at least 30%.”
The other major target is older Australians who will be encouraged to downsize in order to free up housing stock for young families. Those aged 65 and over can make an after tax contribution up to $300,000 into their superannuation account out of the money from the sale of their home.
To be eligible, they must have owned the home for 10 years and it has to be their principal place of residence. Both partners in a relationship can do this, meaning combined they can contribute up to $600,000 to super.
This will be an additional super contribution, and those making such a contribution won’t be subject to the usual contribution cap and voluntary contribution rules, so they won’t:
The levy almost all Australians pay for Medicare will increase by 0.5% from 1 July 2019, so the Government can fully pay for the National Disability Insurance Scheme.
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