2017-2018 Federal Budget Expert Analysis - Superannuation

Key points:

  • Limited Recourse Borrowing Arrangements to be included in a member’s superannuation balance and transfer balance caps

  • First home owners will be allowed to salary sacrifice to superannuation for home deposits

  • Home sellers 65 years or over can make non-concessional contributions to superannuation

From 1 July 2017 Limited Recourse Borrowing Arrangements (LRBA) are to be included in a member’s total superannuation balance and transfer balance caps. These changes will mean the outstanding balance of an LRBA will now be included in a member’s annual total superannuation balance and the repayment of the principal and interest of an LRBA from a member’s accumulation account will be a credit in the member’s transfer balance account.

Whilst not directly a superannuation measure, from 1 July 2017, first home buyers will be able to salary sacrifice into superannuation to save for a first home deposit. Up to $15,000 per year (within the existing $25,000 concessional contribution cap), and $30,000 in total can be salary sacrificed. The contributions are taxed at the normal concessional contribution rate of 15% with earnings on these contributions also taxed at 15%. When the contributions and deemed earnings are withdrawn they will be taxed at the first home buyer’s marginal rate less a 30% tax offset. Contributions can be made from 1 July 2017, with withdrawals allowed from 1 July 2018. Both members of a couple can take advantage of this measure to buy their first home together.

Similar to the preceding measures for first home buyers, superannuation concessions will be available for home sellers 65 years or over. From 1 July 2018 the Government will allow a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions. This measure will apply to sales of a principal residence owned for the past ten or more years. Both members of a couple will be able to take advantage of this measure for the same home for a total of $600,000.