Affordable housing – Is super the answer?

In the 2017 Budget, the Government announced several measures designed to ease the pressure on spiralling housing prices, particularly in the East Coast capital cities of Melbourne, Sydney and to a lesser degree, Brisbane.

I will provide an update on two of the key measures contained in the 2017 Budget.

On 7 September, the Government tabled a Bill in the House of Representatives covering its first two measures.

  1. The First Home Savers Super Scheme (FHSSS)

This initiative is designed to allow intending first home buyers to save for their home deposit through superannuation and then withdraw the savings when the time comes to buy.

A broad outline of the scheme will allow additional contributions of up to $15,000 to be made each year with the maximum amount that may be withdrawn being $30,000 plus investment earnings. For a couple, multiply this by two.

Contributions may be concessional contributions, such as those made under a salary sacrifice arrangement or personal contributions where a tax deduction has been claimed. Or, they may be non-concessional contributions made from after-tax income. All contributions made under the scheme are subject to the usual contribution caps.

Contributions made by an employer in fulfilling their superannuation guarantee obligations – the 9.5% contribution – cannot be withdrawn under the scheme. Only voluntary contributions may be withdrawn.

The FHSSS came into effect on 1 July 2017, however, at the time of writing, the legislation has not been passed by the Parliament.

With that is mind, it might be prudent to wait until there is legislative certainty before making additional voluntary contributions that may be required for a home deposit.

Whether the FHSSS is an appropriate strategy will be very much dependent on individual circumstances. Some appropriate advice, before putting extra money into super, is vitally important.

  1. Downsizer Contributions

In an attempt to free up housing that is currently occupied by older Australians, the Government has introduced legislation that will enable people aged 65 and over, who have owned their home for at least 10 years, to contribute up to $300,000 of the sale proceeds of their home to superannuation as a non-concessional contribution.

These contributions will not be subject to the usual restrictions that apply to making non-concessional contributions.

Once legislated, this initiative is due to come into effect from 1 July 2018. It will only apply to home sales occurring on or after that date.

Whether this measure will make a meaningful difference to the supply of housing is questionable.

One of my biggest concerns is that the primary residence is currently exempt from the assets and income tests for the age and Veterans Affairs pensions. With a very high proportion of older Australians receiving either a part or a full pension, the implications of downsizing could be significant.

Selling the family home and investing any surplus proceeds from the sale into superannuation, or most other types of investment will see money that was previously exempt from means testing now being caught under the assets and income test.

In fact, a couple of modest means who own a valuable home could lose their age pension entirely if they sold their family home and contributed $300,000 each to superannuation as a non-concessional contribution.

However, contributing the surplus proceeds from the sale of a family home, to super will be quite appropriate for some.

Like so many of these initiatives that at first glance seem very attractive, the devil lies in the detail. Whether selling the family home and downsizing simply to get more money into super is an appropriate strategy, will depend on individual circumstances.


Source:  Peter Kelly | Centrepoint Alliance

When should you really start planning for my retirement?

Whether it is planning for retirement, buying a new home, deciding what school to send the kids to, what job to take, or where to go for holidays, there are simply numerous variables that need to be taken into account.

For many of us, retirement will last for 20 to 30 years, so getting it right becomes very important indeed.

The short and simple answer to the question posed is ‘as early as possible’. Retirement planning is something we should start to think about as soon as we start working.

I am not saying for one moment that retirement should be at front of mind for a 25-year-old, however a couple of simple steps put into action very early in working life, that form part of a ‘set and forget’ strategy, may be the difference between a bleak or a comfortable retirement.

Superannuation is the Government’s preferred retirement savings structure, and it provides for some very attractive tax benefits.

Employers currently contribute 9.5% of their employee’s salary to super and many employees think that is enough, particularly as this will increase to 12% over the coming years. But will that be enough?

I have always held the view that, coupled with the good and robust investment of superannuation savings, in a low-cost super fund, extra money should be contributed to super. And what is the magic number?

If someone were to have somewhere between 15% and 18% of their salary contributed to super over their entire working life, their accumulated super at retirement would have a significant impact on the type of lifestyle they can afford in retirement.


Source:  Peter Kelly | Centrepoint Alliance

Amended Government superannuation package

The Government has released an amended superannuation package.

Note: these changes are not yet legislated and still have to be introduced and made through Parliament.

Some measures remain largely unchanged while others such as the lifetime $500,000 non-concessional cap and the removal of the work test for over 65s have been replaced or scrapped altogether.

Once legislated, most measures will take effect from 1 July 2017. There are still many unanswered questions around the practical operation of many of the measures. We await the draft legislation for further details.

Objective of superannuation

The primary objective of superannuation is to provide income in retirement to substitute or supplement the age pension.

Non-concessional contributions (NCCs)
From 1 July 2017:
• the annual non-concessional contributions (NCC) cap will be reduced from $180,000 per year to $100,000 per year
• individuals under age 65 will be eligible to bring forward 3 years ($300,000) of NCCs
• individuals with a total superannuation balance of more than $1.6 million will be unable to make NCCs.

$1.6 million eligibility threshold
The $1.6 million eligibility threshold will be tested at 30 June of the previous financial year.
This means if the individual’s balance at the start of the financial year is more than $1.6 million they will not be able to make any further NCCs.

Individuals with balances close to $1.6 million will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.

Under transitional arrangements, if an individual has not fully utilised their NCC bring-forward cap before 1 July 2017, the remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps.

The $1.6 million eligibility cap will be indexed in $100,000 increments in line with the consumer price index (CPI) ie the same as the $1.6 million pension cap.

Broadly commensurate treatment will apply to members of defined benefit schemes.

Work test
As currently, the work test will continue to apply for individuals aged between 65 and 74. This was previously proposed to be removed.

Individuals aged between 65 and 74 will be eligible to make annual NCCs of $100,000 from 1 July 2017 if they meet the work test (ie gainfully employed for 40 hours in 30 consecutive days) but cannot use the bring forward option.

Worked examples (provided by the Government)
Example 1 – bring-forward rule
Kylie’s (age 58) superannuation balance is $500,000. She sells an investment property and makes a $200,000 NCC in October 2017.

As Kylie has triggered the bring-forward option, she can make a further $100,000 NCC in 2018/19.

Kylie’s NCCs would reset in 2020/21 and she could make further contributions from then.

Example 2 – bring-forward rule
Molly (age 40) has a superannuation balance of $200,000.

In September 2016, she receives an inheritance of $250,000, which she contributes to superannuation, triggering the $540,000 3-year bring forward option.

From 1 July 2017, Molly can make a $110,000 NCC in 2017/18 and $20,000 in 2018/19. She can then access the new bring forward option from 2019/20 and contribute up to $300,000 in NCCs.

Note: This may mean an individual under age 65 in 2016/17 can trigger the current bring-forward option (subject to eligibility) and contribute an entire $540,000 in NCCs. It is unclear exactly how the remaining bring forward cap will apply from 1 July 2017 where less than $540,000 is contributed.

Example 3 – work test
Gary (age 72) a retiree, works around 40 hours in September every year and has a superannuation balance of $450,000.

As Gary meets the work test, he can make a $100,000 NCC in 2017/18.

However, as Gary is over age 65 he cannot access the 3-year bring forward option.

Example 4 – $1.6 million eligibility threshold
Eamon (52) has a total superannuation balance of $1.45 million. He can make a $200,000 NCC in 2017/18.

He cannot access the full 3-year bring forward option as this would take his balance over $1.6 million.

Eamon would also not be able to make any further NCCs.

CGT cap
Separate to the NCC cap, the current CGT cap of $1,415,000 (2016/17) continues to apply for small business owners.

Concessional contributions (CCs), contributions tax and catch up CCs
The annual concessional contributions (CCs) cap will be reduced to $25,000 (currently $30,000 and $35,000 if age 50 or over) from 1 July 2017 for all individuals.

The cap will index in line with Average Weekly Ordinary Time Earnings (AWOTE).

Individuals with adjusted taxable income of $250,000 (currently $300,000) will incur 30% tax on their concessional super contributions from 1 July 2017.

Catch-up CCs
This measure has been pushed out a further 12 months.
From 1 July 2018, unused CC cap amounts can be carried forward over 5-year periods accrued from 1 July 2018 where total super balance is under $500,000.

Example 5 – catch-up CCs
Anne has a superannuation balance of $200,000 but did not make any concessional superannuation contributions in 2018/19 as she took time off work to care for her child.

In 2019/20 she has the ability to contribute $50,000 into superannuation ($25,000 under the annual concessional cap and $25,000 from her unused 2018/19 cap which has been rolled over).

Tax deduction for personal super contributions
Individuals under age 75 and not just the wholly or substantially self-employed will be able to claim a tax deduction for their personal super contributions from 1 July 2017. This means more people will be able to make concessional contributions and it provides an alternative to salary sacrifice.

Example 6 – tax deduction for personal contributions
Chris has started his own online merchandise business but continue to work part-time at an accounting firm earning $10,000 as his business is growing.

His business earns $80,000 in his first year and he would like to contribute $15,000 of his $90,000 income to his superannuation.

Chris could claim a tax deduction for his $15,000 of superannuation contributions.

$1.6 million pension cap
A $1.6 million cap will apply on the amount that can be transferred into the superannuation pension phase from 1 July 2017. There will be no restriction on subsequent earnings.
Accumulated super in excess of $1.6 million can be retained in a member’s accumulation account (with earnings taxed at 15%) or moved outside super.

The cap will index in $100,000 increments in line with the consumer price index (CPI) and is expected to be around $1.7 million in 2020/21.

Transition to retirement (TTR)
Individuals who have reached preservation age can still access a transition to retirement (TTR) income stream but earnings on the amount supporting it will be taxed at 15%.

Innovative new retirement income stream products, such as deferred lifetime annuities and self-annuitisation products will become eligible for the earnings tax exemption.

Individuals will no longer be able to elect to draw lump sums from their TTR pension to reduce tax.

The tax treatment of income stream payments remains unchanged ie; for recipient’s age 60 or over the payments will be tax free, or taxed at the individual’s marginal tax rate less a 15% tax offset between preservation age and age 60.

Spouse contributions and tax offset
As currently, individuals can only make spouse contributions where the receiving spouse is under age 65 or age 65-70 and working.

The income threshold of a low income spouse for the purposes of the spouse contribution tax offset will increase from $13,800 to $40,000, from 1 July 2017.

Low income superannuation tax offset (LISTO)
The low income super contribution (LISC) will be replaced with the Low income superannuation tax offset (LISTO) from 1 July 2017.

The LISTO will automatically refund tax paid on low-income earners’ concessional contributions. The offset is capped at $500 where taxable income is less than $37,000.

Without the offset, low income earners would pay more tax than if they earned the income directly.

The anti-detriment will be abolished from 1 July 2017 as previously announced

Source: Asteron Life

2016 Federal Budget breakdown

In brief, here are 3 key areas handed down by Scott Morrison in the Federal Budget;

Health, welfare and aged care

Renting family home – when a person enters residential aged care and rents their former home, the house and rent will be included for assets and income testing when determining entitlement for an age and service pension. This will only apply to new residents entering residential aged care from 1 January 2017.

Disability Support Pension (DSP) – recipients will have their eligibility reassessed over the next three year to determine their continued eligibility.

Child and Adult Public Dental Scheme – will be available to children and adults covered by a concession card.

Medical Benefits Schedule – fees frozen under the previous budget are to be extended for a further two years.

My Aged Care contact centre – additional funding has been provided to support services provided by the My Aged Care contact centre.



Personal tax rate the income threshold at which the 37 per cent tax rate cuts in will increase from $80,000 to $87,000. This is due to apply from 1 July 2016.

Company tax rate – the company tax rate is currently 28.5 per cent for companies with turnover of less than $2,000,000, and 30 per cent for larger companies.

The budget proposes to progressively reduce the company tax rate to 25 per cent by 2026-27, and commencing from 1 July 2016 for companies with turnover of less than $2,000,000, their tax rate will reduce by 1 per cent to 27.5 per cent.

Small business – a small business is defined as one with annual turnover of less than $2,000,000. A number of concessions are available to businesses that fall within this definition, including a lower rate of company tax rate and simplified depreciation rules.

From 1 July 2016, the definition of a small business will be extended to businesses with a turnover of less than $10,000,000. However, for purposes of accessing the small business capital gains tax concessions, the current turnover threshold of $2,000,000 will be retained.

Unincorporated small business tax discount – currently receive a 5 per cent discount on the tax they pay. The budget included a proposal that will see this discount progressively increase to 16 per cent over the coming years. The discount will increase to 8 per cent from 1 July 2016.


Financial year Discount
2016-17 8 %
2017-18 to 2024-25 10 %
2025-26 13 %
2026-27 and future years 16 %

The maximum discount remains capped at $1,000.

Medicare levy surcharge and private health insurance rebate thresholds – effective from 1 July 2018, the indexation of the income threshold will be frozen for a period of three years.



This year’s announcements are probably the most significant since the superannuation reforms that took effect from 1 July 2007. Except for a couple of notable exceptions, the proposed budget changes will take effect from 1 July 2017, subject to being legislated.

Concessional superannuation contributions – Concessional contributions caps of $30,000, and $35,000 for people aged over 49 will continue for the 2015-16 and 2016-17 financial years.  From 1 July 2017 the concessional contribution cap will reduce to $25,000 for all.

People with less than $500,000 in super who have not utilised all their full concessional contribution cap ($25,000) in a financial year will be able to carry forward any unused cap and make additional contributions in following years.
Unused concessional contribution amounts can be carried forward for up to five years.

Low income superannuation tax offset – Low income earners (people earning less than $37,000) currently receive a Low Income Superannuation Contribution (LISC) from the government of up to $500 to compensate for the 15 per cent tax paid on their superannuation guarantee contributions.

The current LISC is due to cease from 1 July 2017, but will be replaced with a new non-refundable tax offset of up to $500.

Low income spouses – from 1 July 2017, the current low income spouse superannuation tax offset of up to $540 will be enhanced with the income threshold for the spouse for whom a contribution is made, being increased from $10,800 to $37,000.

Contributions for older Australians – Superannuation contributions can only be made by people aged between 65 and 74 if they meet a ‘work test’ in the financial year in which contributions are made. The work test requires they be gainfully employed, or self-employed for a period of at least 40 hours, worked within a period of 30 consecutive days.

The intention is to remove the work test requirement thereby enabling older Australians to contribute to superannuation without having to meet the work test. This is due to apply from 1 July 2017. However, there is no change to allow people over the age of 74 to make or receive contributions to super, other than mandated employer contributions.

Tax deductibility of super contributions – currently a person may only claim a tax deduction for personal super contributions if they derive less than 10 per cent of their assessable income (+ reportable fringe benefits and reportable superannuation contributions) from employment.

The budget proposes that anyone under the age of 75 will be able to make tax deductible personal contributions, irrespective of their age or work status. This change is proposed to take effect from 1 July 2017.

However, consideration needs to be given to the concessional contribution cap, and any employer contributions that may also be made. Furthermore, a tax deduction for personal contributions cannot create a carried forward tax loss.

Non-concessional contribution lifetime limit – current limit is $180,000 per annum. The budget has proposed replacing the current non-concessional cap with a lifetime limit of $500,000.

Even though legislation has not been introduced, it is proposed this change will take effect from 3 May 2016. And, to complicate matters even further, any non-concessional contributions made since 1 July 2007 will be assessed against the lifetime cap.

Extension of tax on super contributions for high income earners – Australians earning more than $300,000 currently pay an additional 15 per cent tax on their concessional superannuation contributions, bringing the total tax rate to 30 per cent. This is referred to as ‘Division 293 tax’.

Effective from 1 July 2017, the threshold will be reduced from $300,000 to $250,000.

Super pension limitations – Money transferred to the pension phase of superannuation is concessionally taxed. That is, a superannuation fund pays no tax on the income it earns on investments that are supporting pension payments.

In the budget, the government announced restrictions will be placed on the amount that can be held in the pension phase of superannuation. The proposed limit is $1,600,000. Amounts in excess of this will need to either be withdrawn from super, or may be retained in an accumulation account with investment earnings being taxed at 15 per cent.

This proposal is retrospective in that people already drawing income from a pension that has a value of more than $1,600,000 as at 1 July 2017, will need to transfer the excess over $1,600,000 back to an accumulation account.

Anti-detriment payments – An anti-detriment payment is an additional benefit that may be paid from a superannuation fund on the death of a member, where the benefit is paid as a lump sum to an eligible dependent beneficiary. It is proposed that anti-detriment payments be abolished from 1 July 2017.

Transition to retirement pensions – It was expected that the budget would introduce restrictions on the use of pre-retirement, or transition to retirement (TTR) pensions. The approach the government has taken on TTR pensions was not as expected.

From 1 July 2017, the investment earnings derived by a super fund that is paying a TTR pension will not be tax exempt to the super fund. Investment earnings of the super fund will be taxed in the super fund at a rate of 15 per cent, instead of the current 0 per cent.



The initiatives announced in the budget are subject to successfully passing through parliament and with an election looming, the success of any of these making it through the legislative process is uncertain at this stage.

However, most of the initiatives announced do make sense despite what some commentators might have said. Certainly, a number of measures are on the harsh side, but we will have to live with those.

The key message at this point is to keep calm. With most of the announcements, we have over a year to digest the implications and develop alternative strategies, where appropriate.


Source:  Treasurer Scott Morrison budget speech

2014 End of year Superannuation Strategies

imagesEnd of year superannuation strategies

The lead up to the end of the financial year is an opportune time to review your financial situation and avoid the last minute rush. We can help you with a number of strategies that can improve your financial position including the potential to reduce tax and take advantage of the concessional superannuation environment.

Here are some super strategies worth considering.    

Superannuation co-contribution is a government incentive to help low income earners build their superannuation balances. If you earn less than $48,516 (2013/14) and make personal contributions to super you may be eligible for up to $500. The amount depends upon your income with the government contributing 50 cents for each dollar you contribute, up to a maximum of $500. 


Personal deductible superannuation contributions is a helpful strategy for eligible individuals as contributions are generally taxed at a concessional rate of 15% compared to a higher marginal rate. This strategy can be particularly helpful if you have sold an asset during the year and realised a significant capital gain, as you may also be able to reduce the any personal income tax been payable on the capital gain.

Generally, this strategy can be implemented by the self-employed, retirees and employees whose employment ‘income’ is less than 10% of their total ‘income’.


Super Salary sacrifice involves an agreement between an employee and an employer to forgo a portion of salary in exchange for payment as a super contribution. The attraction of this strategy is ‘swapping’ a higher marginal tax rate for the concessional rate of 15% that is generally charged on super contributions.


If you’re due for a pay rise or an end-of-year bonus, you may be able to salary sacrifice this into super. Also if you are still within your concessional contributions cap (see important note below) you may be able to increase your salary sacrifice contributions to take full advantage of this concession.   

Important note: the ‘concessional contributions cap’ limits the amount of concessional contributions (including salary sacrifice and personal deductible) before tax consequences may apply. The concessional contributions cap for 2013/14 is $25,000 if you are under 60, or $35,000 if you are 59 or older as at 30 June 2014.      


Non-concessional contributions often called ‘after-tax’ contributions are another way to increase investments in the concessionally taxed super environment.

The non-concessional contributions cap is $150,000 (2013/14). However, if you are under age 65 at any time during the financial year, you can bring forward the next two years’ non-concessional contributions caps to allow larger contributions to be made (providing you haven’t already done so in the two previous financial years). The ‘bring-forward’ cap is $450,000 and is automatically triggered when your after-tax contributions are more than $150,000 (2013/14).

The non-concessional contributions and ‘bring-forward’ caps have been increased for 2014/15 to $180,000 and $540,000 respectively. A strategy of triggering the ‘bring forward’ in 2014/15 rather than this financial year may enable increased amounts to be contributed to superannuation over time. Timing of contributions including when to trigger the bring-forward is an important consideration to optimise contribution levels and avoid tax penalties. 


Spouse contribution provisions allow taxpayers to make after tax super contributions to their spouse’s superannuation account. Advantages include:

  • Investing for a spouse who may have little or no superannuation; and 
  • A tax offset for contributions for a low income earning spouse

A spouse tax offset worth up to $540 is available for a taxpayer who contributes for a spouse who earns less than $10,800. The offset reduces to nil when income reaches $13,800.


Spouse contributions splitting may help you and your spouse to accumulate more tax-effective wealth for retirement. 

Generally, contributions splitting allows a member to split up to 85% of their employer and personal tax deductible super contributions made in the previous financial year to their spouse’s super. Splitting has a number of advantages including maximising superannuation withdrawals via two ‘low rate caps’.   

Amounts up to the ‘low rate cap’ of $180,000 (2013/2014 & $185,000 2014/15) are included in assessable income but taxed at a zero rate of tax, so splitting contributions to a spouse’s account enables up to $360,000 to be withdrawn by a couple with zero tax payable on the withdrawal. 


Source | OnePath