Federal Budget 2017: Some highlights

On Tuesday 9^th May at 7.30pm the 2017/18 Federal Budget was released, with the Honourable Scott Morrison MP, Treasurer of the Commonwealth of Australia, labelling it a fair and responsible path back to a balanced budget.

This follows the 2016 Budget, which was an ‘economic plan for extraordinary times’ and the 2015 Budget, delivered by the Honourable Joe Hockey MP, which was to help ‘build a stronger, safer and more prosperous Australia’.

There were few superannuation-related announcements this year – not surprising given the significant number of legislative changes announced in 2016. However there were some proposed initiatives members may find relevant, including the following:

Housing affordability – first home buyers

The government has announced that first home buyers will be able to save for a deposit by salary sacrificing into their superannuation account over and above their compulsory superannuation contribution from July 1 2017.

The First Home Super Savers Scheme will attract the tax advantages of superannuation. Contributions and earnings will be taxed at 15 per cent, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less 30 percentage points.

Savers will not have to set up another account, they can just use their existing super account and decide how much of their income they want to put aside to save for their first home deposit.

Contributions will be limited to $30,000 per person in total and $15,000 per year.

Many employees will be able to take advantage of salary sacrifice arrangements to make pre-tax contributions. Individuals who are self-employed or whose employers do not offer salary sacrifice can claim a tax deduction on personal contributions, meaning savings effectively come out of pre-tax income.

Voluntary contributions under this scheme must be made within existing superannuation caps.

Here’s how it could work:

You can download the government’s Budget Fact Sheet here.

Encouragement to downsize – older Australians

The Treasurer has announced an intention to free up housing stock, by ‘enabling downsizers over the age of 65 to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.’

According to the Budget Fact Sheet,¹ from 1 July 2018, people aged 65 and over will be able to make a non-concessional (post-tax) contribution into their superannuation of up to $300,000 from the proceeds of selling their home. For couples, that means up to $600,000 that can be contributed to superannuation through the downsizing cap.

The existing voluntary contribution rules for people aged 65 and older (work test for 65-74 year olds, no contributions for those aged 75 and over) and restrictions on non-concessional contributions for people with balances above $1.6 million will not apply to contributions made under this new special downsizing cap.

There are provisos though: the measure will apply to a principal place of residence held for a minimum of 10 years. And any change in the person's superannuation balance as a result of this measure will count towards the Age Pension assets test.

Here’s how it could work:

You can download the government’s Budget Fact Sheet here.

A new dispute resolution framework

‘We want customers and taxpayers to get a fairer deal from our banks,’ said Morrison.

‘For the system to be fairer, there needs to be greater competition and accountability – now.’

To enhance accountability, the government intends to establish a simpler, more accessible and more affordable one-stop shop for Australians to resolve their disputes and obtain binding outcomes from the banks and other financial institutions, to be known as the Australian Financial Complaints Authority.

The new one-stop shop will deal with all financial disputes, including superannuation, and provide access to free, fast and binding dispute resolution. ASIC will also be provided with stronger powers to oversee the new one-stop shop.

Pensioner concession card

To support older Australians the government has announced that it is restoring the pensioner concession card to those impacted by the pension assets test change introduced earlier this year.

As a result, pensioners will regain access to state and territory based concessions that were withdrawn after the change.

Benefits of the pensioner concession card can include:

• cheaper medicine under the Pharmaceutical Benefits Scheme
• bulk billed doctor visits – this is up to your doctor
• a bigger refund for medical costs when you reach the Medicare Safety Net
• help with hearing services – read more about the Hearing Services Program on the Department of Health website
• discounts to redirect your mail through Australia Post

State and territory concessions are also available. Queensland residents can read about state-based benefits here.

You can find out more about the pensioner concession card here.

Energy Assistance Payment

The government has also announced that it intends to make a one off Energy Assistance Payment in 2016/17 of $75 for single recipients and $125 per couple for those eligible for qualifying payments on 20 June 2017 and who are resident in Australia.

Qualifying payments include the Age Pension, Disability Support Pension, Parenting Payment Single, the Veterans’ Service Pension and the Veterans’ Income Support Supplement, Veterans’ disability payments, War Widow(er)s Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.

A number of other proposed changes were announced, including stronger rules for foreign investors owning Australian housing, measures backing innovation and fintech, strengthening welfare mutual obligation requirements, infrastructure investment and a future increase in the Medicare levy to help fund the NDIS.

Overall, according to the Treasurer, it is an honest Budget that sets out a credible and affordable plan, based on the principles of fairness, security and opportunity.

‘This is a Budget that makes the right choices for Australians who are working hard to secure the better days ahead for themselves and their families,’ said Morrison.

‘That is why this Budget is a plan that can be trusted and supported.’

The full Budget papers can be downloaded here.

1 Fact Sheet 1.5 - Reducing barriers to downsizing www.budget.gov.au