Housing, superannuation and pension changes in 2017-18

See what rules come into effect in 2018 and what changed during 2017.

After some toing and froing on the political front, a number of proposed superannuation and pension changes came to fruition in 2017, with more to come on the housing front in 2018.

Here’s a wrap-up of the changes that passed through parliament and how they could affect you.

What's taking place in 2018

Tax incentives will be available for first home buyers 

From 1 July 2018, eligible first home buyers will be able to withdraw voluntary super contributions, which they’ve made since 1 July 2017 (up to a certain limit) to put toward their first home. 

Under the First Home Super Saver Scheme (FHSSS), first home buyers who make voluntary contributions of up to $15,000 per year into their super can withdraw these amounts, in addition to associated earnings, from their super fund to help with a deposit on their first home.

If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples.

To be able to withdraw this money, eligible candidates must apply to the Australian Taxation Office and if they are eligible, a one-time-only withdrawal is permitted under the scheme.

Due to superannuation’s favourable tax treatment, this initiative may help first home buyers to build a deposit more quickly.

Downsizers will be able to put more into super

Currently, those who are aged between 65 and 75 must satisfy a work test to make voluntary super contributions, while those over 75 are generally unable to contribute to their super.

From 1 July 2018, this will change. Those aged 65 or over will be able to make an after-tax contribution to their super of up to $300,000 with the proceeds from the sale of their family home. This is regardless of their work status or superannuation balance.

Meanwhile, both members of a couple are able to take advantage of this incentive, meaning $600,000 per couple can be contributed toward super.

To qualify, the property sold needs to have been the individual or spouse’s main place of residence for at least 10 years.

What happened in 2017

You can no longer put as much money into your super savings on the back of reduced super caps, which came into effect on 1 July 2017. Here’s a high-level summary of the super cap changes:

Contribution type Your age Current cap Previous cap
Before-tax super contributions Under 50 $25,000 per annum $30,000 per annum
Before-tax super contributions 50 or over $25,000 per annum $35,000 per annum
After-tax super contributions Under age 65 $100,000 per annum and up to $300,000 under the bring-forward rules  $180,000 per annum and up to $540,000 under the bring-forward rules
After-tax super contributions 65 or over $100,000 per annum $180,000 per annum

Remember, before-tax super contributions include super guarantee payments which are typically made by your employer.

Also, people can no longer make any further after-tax contributions into their super once they have a total super balance of $1.6 million or above as at 30 June of the previous financial year.

Remember, if you’re 65 or over at the time of making a contribution, a work test must still be satisfied.

For those converting their super into a pension to derive an income in retirement, they’re now restricted to transferring a maximum of $1.6 million into their tax-free pension account, not including subsequent earnings. 

If an individual accumulates a super balance above this limit on or after 30 June 2017, the additional savings need to remain in the accumulation phase (where earnings are taxed at the concessional rate of 15%), or taken out of super completely to avoid potential penalties.

It’s also important to note, once an individual transfers $1.6 million into a retirement pension, even if their balance does reduce over time, they’re unable to top up their pension a second time.

While investment earnings on super fund assets that support a pension are still tax free, this no longer applies to transition to retirement (TTR) income streams.

Earnings on fund assets supporting a TTR income stream are now subject to the same maximum 15% tax rate that applies to super accumulation funds.

There are no changes however to the way that income payments received from a TTR income stream are taxed.

If an individual makes a contribution into their spouse’s super account, they’re potentially entitled to a maximum tax offset of $540 if certain requirements are met.

The government increased eligibility for this tax incentive on 1 July 2017 by raising the lower income threshold for the receiving spouse from $10,800 to $37,000.

There was a requirement that if a person received employment income during a financial year, they had to earn less than 10% of their income from employment-related activities over the same time period to claim a tax deduction for a personal super contribution.

This is no longer a requirement—and now any individual who is eligible to contribute can typically claim a tax deduction for their personal super contributions.

This incentive is generally available to anyone between the ages of 18 and 75 that is making a personal contribution, with work test requirements necessary for those over age 65.

Broadly, those earning $250,000 or more annually now pay an extra 15% tax on any before-tax super contributions, on top of the concessional rate of 15%, bringing the tax rate to 30%.

Prior to 1 July 2017, this tax only applied to those earning $300,000 and above.

To be eligible for a full or part Age Pension, those aged 65 or over must satisfy an income test and an assets test, as well as other requirements.

Changes to the assets test, which came in on 1 January 2017, saw more people receive the full Age Pension, but fewer receive the part Age Pension1.

Table 1: Full Age Pension thresholds then and now

If an individual’s assets are below the current thresholds in table one, they’re eligible for a full Age Pension under the current assets test.

Full pension Current asset limits Previous asset limits
Non-homeowner (single) $456,750 $360,500
Non-homeowner (couple) $583,500 $448,000
Homeowner (single) $253,750 $209,000
Homeowner (couple) $380,500 $296,500

* Note, figures are current as at 20 September 2017.

Table 2: Part Age Pension thresholds then and now

This table outlines the assets test cut-off point for those on a part pension. If an individual has assets above the current limits, a part-pension is no longer payable.

Full pension Current asset limits Previous asset limits
Non-homeowner (single) $755,000 $945,250
Non-homeowner (couple) $1,033,000 $1,330,000
Homeowner (single) $552,000 $793,750
Homeowner (couple) $830,000 $1,178,500

* Note, figures are current as at 20 September 2017.

Find out more about which assets are assessable on the Department of Human Services website.

If someone lost their Age Pension in 2017 as a result of the changes, they were automatically entitled to receive a Commonwealth senior’s health card and/or a low-income health care card, which provide access to things such as Medicare bulk billing and less expensive pharmaceuticals.

Still have questions?  

For further assistance regarding the topics mentioned above, speak to your financial adviser. And, if you don’t have one, but need help finding one, call us on 131 267 or use our find an adviser tool.

1 Super Guide – 300,000 retired Australians to lose some or all age pension entitlements paragraph 1, 3

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