{"id":13984,"date":"2017-05-10T07:25:53","date_gmt":"2017-05-09T19:55:53","guid":{"rendered":"http:\/\/quantiphy.com.au\/oldbackup\/superannuation-updates-2017-18\/"},"modified":"2020-11-29T00:12:28","modified_gmt":"2020-11-28T12:42:28","slug":"superannuation-updates-2017-18","status":"publish","type":"post","link":"https:\/\/quantiphy.com.au\/oldbackup\/superannuation-updates-2017-18\/","title":{"rendered":"SUPERANNUATION UPDATES 2017-18"},"content":{"rendered":"

No major new super measures, but 1\u00a0July reforms loom large<\/span><\/h2>\n

The Government did not announce any new major superannuation measures in the Budget. This will be a welcome relief for the super industry, which already has enough on its plate with major reforms set to start on 1\u00a0July\u00a02017. As is the case with any large-scale changes such as the 1\u00a0July\u00a02017 super reforms, refinements are often necessary to address unanticipated consequences as part the implementation process.<\/span><\/p>\n

Super changes announced<\/i><\/b><\/h3>\n

A range of superannuation measures were announced in the Budget, including:<\/span><\/p>\n

    \n
  • the current tax relief for merging superannuation funds will be extended until 1\u00a0July\u00a02020;<\/span><\/li>\n
  • the non-arm\u2019s length income provisions will be amended from 1\u00a0July\u00a02018 to reduce opportunities for members to use related-party transactions on non-commercial terms;<\/span><\/li>\n
  • limited recourse borrowing arrangements will be included in a member\u2019s total super balance and the $1.6\u00a0million pension transfer balance cap from 1\u00a0July\u00a02017;<\/span><\/li>\n
  • a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home from 1\u00a0July\u00a02018; and<\/span><\/li>\n
  • a first home super saver scheme will allow future voluntary contributions to superannuation to be made by first home buyers from 1\u00a0July\u00a02017 to be withdrawn for a first home deposit, along with associated deemed earnings.<\/span><\/li>\n<\/ul>\n

    Merging super funds: tax relief extended until 1\u00a0July\u00a02020<\/span><\/h2>\n

    The Government will extend the current tax relief for merging superannuation funds until 1\u00a0July\u00a02020 to remove tax as an impediment to fund mergers and industry consolidation.<\/span><\/p>\n

    Since\u00a0December\u00a02008, tax relief has been available for APRA regulated superannuation funds under Div\u00a0311 of the ITAA 1997 to transfer capital and revenue losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets. This tax relief was due to lapse on 1\u00a0July\u00a02017. It will now be extended until 1\u00a0July\u00a02020.<\/span><\/p>\n

    The Government said that this tax relief for merging funds will be temporarily extended as the Productivity Commission completes a review into the efficiency and competitiveness of the super industry. According to the Government, extending this relief will ensure super fund members\u2019 balances are not reduced by tax when superannuation funds merge.<\/span><\/p>\n

    Merger tax relief will apply until 1\u00a0July\u00a02020.<\/span><\/p>\n

    Note that the Government also released exposure draft legislation on 13\u00a0April\u00a02017 proposing to expand the tax relief available to superannuation funds when mandatorily transferring assets as part of the transition to the MySuper rules (generally by 1\u00a0July\u00a02017).<\/span><\/p>\n

    Super fund related-party transactions: non-arm\u2019s length income rules to be amended<\/span><\/h2>\n

    The non-arm\u2019s length income (NALI) provisions for super funds will be amended from 1\u00a0July\u00a02018 to reduce any opportunities for members to use related-party transactions on non-commercial terms to increase superannuation savings.<\/span><\/p>\n

    Specifically, the NALI provisions in s\u00a0295-550 of the <\/span>Income Tax Assessment Act 1997 <\/span><\/i>\u00a0will be amended to ensure expenses that would normally apply in a commercial transaction are included when considering <\/span>whether the transaction is on a commercial basis. A super fund\u2019s non-arm\u2019s length income (also known as \u201cspecial income\u201d) is taxed at 47% instead of the 15% concessional rate.<\/span><\/p>\n

    The measure will seek to ensure that the super reform legislation operates as intended. Essentially, it appears to be aimed at preventing individuals from using non-arm\u2019s length arrangements with their superannuation fund to circumvent the pension balance cap and total superannuation balance threshold.<\/span><\/p>\n

    Super borrowings: LRBA integrity measure for pension cap<\/span><\/h2>\n

    As an integrity measure, the use of limited recourse borrowing arrangements (LRBAs) by superannuation will be included in a member\u2019s total superannuation balance and for the purposes of the $1.6\u00a0million pension transfer balance cap from 1\u00a0July\u00a02017.<\/span><\/p>\n

    According to the Government, LRBAs can potentially be used to circumvent contribution caps and effectively transfer growth in assets from the accumulation phase to the retirement phase that is not captured by the pension transfer balance cap. From 1\u00a0July\u00a02017, the outstanding balance of an LRBA will be included in a member\u2019s annual total superannuation balance. In addition, the repayment of the principal and interest of an LRBA from a member\u2019s accumulation account will be a credit in the member\u2019s pension transfer balance account. The measure is expected to save only $4\u00a0million over the forward estimates.<\/span><\/p>\n

    The Government previously released exposure draft legislation on 27\u00a0April\u00a02017 proposing to include the use of LRBAs by self managed super funds in a member\u2019s total superannuation balance and the $1.6\u00a0million pension transfer balance cap. Importantly, that draft legislation only proposed to apply on prospective basis in relation to borrowings that are entered into on or after the commencement of the Bill. So the Budget proposal to apply such an integrity measures to outstanding LRBA balances from 1\u00a0July\u00a02017 seems a significant shift in policy.<\/span><\/p>\n

    Super contributions of proceeds up to $300,000 from downsizing a home<\/span><\/h2>\n

    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 from 1\u00a0July\u00a02018. 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\u00a0million total superannuation balance test for making non-concessional contributions (which applies from 1\u00a0July\u00a02017).<\/span><\/p>\n

    The measure will apply to sales of a principal residence owned for the past 10 years or more. Both members of a couple will be able to take advantage of this measure for the same home. The measure seeks to reduce a barrier to downsizing for older people to enable more effective use of the housing stock by freeing up larger homes.<\/span><\/p>\n

    Note that the proceeds from downsizing a home in this manner are not proposed to be exempt from the Age Pension assets test.\u00a0<\/span><\/p>\n

    First home super saver scheme<\/span><\/h2>\n

    The Government will encourage home ownership by allowing future voluntary contributions to superannuation made by first home buyers from 1\u00a0July\u00a02017 to be withdrawn for a first home deposit, along with associated deemed earnings.<\/span><\/p>\n

    Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30% offset. Combined with the existing concessional tax treatment of contributions and earnings, this will provide an incentive that will enable first home buyers to build savings more quickly for a home deposit.<\/span><\/p>\n

    Under the measure up to $15,000 per year and $30,000 in total can be contributed, within existing caps. Contributions can be made from 1\u00a0July\u00a02017. Withdrawals will be allowed from 1\u00a0July\u00a02018 onwards. Both members of a couple can take advantage of this measure and combine savings for a single deposit to buy their first home together.<\/span><\/p>\n

    This measure is expected to have a cost to revenue of $250\u00a0million over the forward estimates. The ATO will be provided with $9.4\u00a0million to implement the measure.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    No major new super measures, but 1\u00a0July reforms loom large The Government did not announce any new major superannuation measures in the Budget. This will be a welcome relief for the super industry, which already has enough on its plate with major reforms set to start on 1\u00a0July\u00a02017. As is the case with any large-scale…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-13984","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"\nSUPERANNUATION UPDATES 2017-18 - Quantiphy<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/quantiphy.com.au\/oldbackup\/superannuation-updates-2017-18\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"SUPERANNUATION UPDATES 2017-18 - Quantiphy\" \/>\n<meta property=\"og:description\" content=\"No major new super measures, but 1\u00a0July reforms loom large The Government did not announce any new major superannuation measures in the Budget. 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