Couple in front of a house Couple in front of a house

2017 Federal Budget

Here's a snapshot of the proposed changes and what they mean for you.

What’s changing?

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Budget snapshot

Changes in more detail

1 July super changes

Budget snapshot

Measures to tackle home affordability were a key focus of this year’s Federal Budget, along with a company tax cut, an increase in the Medicare levy, changes to school funding models and the introduction of a new bank levy.

Two of the measures on home affordability directly involve super – a newly announced First Home Super Saver Scheme and a scheme to facilitate downsizing for older people. The Home Saver scheme relates to voluntary super contributions, not existing compulsory super savings. You’ll find more detail on this in Changes in more detail.

Key changes include:

  • Adding money to super from downsizing your home
  • First Home Super Saver Scheme
  • Reinstatement of Pensioner Concession Cards
  • One-off energy payment for older Australians
  • Increase in Medicare Levy
  • New Financial Complaints Authority

These changes have not been legislated yet. If you decide to add more money into your account for the purposes of the First Home Super Saver Scheme, but the Scheme is not passed into legislation, you won’t be able to withdraw the savings you added until you meet a condition of release (e.g. you retire from the workforce). And if you change your mind, you won’t be able to withdraw those extra savings for something else – so it’s important you make the right decision.

There were no other major super changes announced, though it is worth keeping in mind that most of the super changes announced in last year’s budget will come into effect on 1 July this year.

Changes in more detail

Adding money to super from downsizing your home

From 1 July 2018, anyone 65 or over will be able to make a personal contribution to super of up to $300,000 ($600,000 for a couple) using money from the sale of their family home. The 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.

It will still be counted towards the $1.6 million transfer balance cap, which is the maximum amount of super you can transfer to a retirement income account. This means that any amounts over the limit will need to stay in your accumulation (super) account. These payments can be made on top of the before and after-tax contribution caps.

You need to have owned your home for at least 10 years, and it must be your principal place of residence. As these contributions will increase your super balance, they will count towards the Age Pension assets test and deeming rules under the income test.

First Home Super Saver Scheme

From 1 July 2017, first home-buyers can make contributions to their super account from their before-tax pay to save for a house deposit. Contributions can be made by salary sacrifice and will be limited to a total of $30,000 per person, and capped at $15,000 a year. This means a couples can save a total of $60,000 or $30,000 a year. You don’t need to open a new account.

These contributions will also count towards the annual $25,000 concessional contributions cap that will apply from 1 July 2017. If you’re self-employed or your employer doesn’t offer salary sacrifice, you can claim a tax deduction on after-tax contributions up to the contribution cap.

Withdrawals can be made from 1 July 2018, and will be be taxed at your marginal tax rate less 30%.

The Australian Taxation Office will administer the scheme and determine whether you’re eligible to withdraw these savings and how much you can withdraw based on your net contributions and a Government set rate of return.

According to Government estimates, the scheme will see a couple adding an extra $12,484 on combined savings of $60,000 over three years than if they had saved in a standard bank deposit account.

Changes for pensioners

If you lost your pensioner concession card due to the changes to the age pension assets test taper rate introduced on 1 January 2017, you'll now have the card reinstated. This means you can access Commonwealth subsidised hearing services and be eligible for pensioner concession cards and discounts in your state or territory.

The Government will also be making a one-off energy payment to pensioners of $75 for singles and $125 for couples. This will be paid automatically before 30 June 2017.

The residency requirements for pensioners is changing from 1 July 2018. New people applying for the Age Pension and disability pension will need to have 15 years of Australian residency before they are eligible. Some people who meet certain conditions may qualify after 10 years of residency.

Medicare Levy and expiry of budget repair levy

From 1 July 2019, the Medicare levy will increase from 2% to 2.5% to help fund the National Disability Insurance Scheme. For example, someone earning $60,000 a year would pay an extra $300 a year, and those earning $80,000 would pay an extra $400 a year.

The budget repair levy ends on 1 July 2017, which means people on the top marginal tax rate (earning $180,000 and above) will pay 2% less in tax. This will return the top marginal tax rate to 45% (plus the Medicare levy).

New Financial Complaints Authority

From 1 July 2018, the Government is proposing a new ‘one-stop shop' for financial disputes, including super. The Australian Financial Complaints Authority (AFCA) will replace existing bodies including the Superannuation Complaints Tribunal. The existing statutory protections applying to super disputes will continue to be provided.

Borrowing in SMSFs

The Government is addressing one of the loopholes which arises when SMSFs borrow by ensuring that those borrowings are included in the members total superannuation balance and transfer balance caps.

1 July super changes

On 1 July 2017 the biggest raft of changes to super (from last year’s budget) will come into effect. If you haven’t already become familiar with the changes, you may want to take some time now to understand what they’ll mean for your super. Here, we answer five popular questions about the changes. Read more.