Contributing Proceeds From Sale Of Home

Effective 1 July 2018

Individuals aged 65 and over will be able to contribute up to $300,000 into super from the proceeds of the sale of their principal place of residence. This measure will apply to a principal place of residence held for a minimum of 10 years.

These contributions will be treated as non-concessional contributions and will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps.

The existing contribution restrictions for people over age 65 and the restrictions on making non-concessional contributions where a person’s total superannuation balance is over $1.6M will not apply. However, these contributions will not be exempt from the transfer balance cap and will only be able to be used to commence a retirement phase pension where the member has remaining transfer balance cap space. The amount contributed will also be fully assessable under the age pension assets test.

First Home Saver Scheme

Effective 1 July 2017

Individuals will be able to make voluntary superannuation contributions in excess of super guarantee of up to $15,000 per year up to a total of $30,000 to purchase their first home. These voluntary contributions, which will be taxed at 15%, along with deemed earnings, can be withdrawn for a deposit on a person’s first home. Withdrawals will be taxed at marginal tax rates less a 30% tax offset and will be allowed from 1 July 2018.

First home savers will be able to salary sacrifice an amount from their pre-tax income directly into super. Individuals who are self-employed or whose employers do not offer salary sacrifice will be able to claim a tax deduction on personal contributions. However, any pre-tax contributions made under these rules must be within the concessional cap.

First home savers will also be able to make non-concessional contributions under this scheme. However, these contributions will not be taxed when they are withdrawn.

The amount of deemed earnings that can be released under these rules will be calculated based on the 90 day Bank Bill rate plus 3% – currently equivalent to a deemed rate of return of 4.77%.

The Government has confirmed that the ATO will have the primary responsibility for administering the scheme, including:

  • eligibility of the person seeking a release
  • calculation of the release amount
  • compliance mechanisms to ensure the released monies are used for the intended purpose.

The Government has also confirmed that while the concessional part of a release amount will be included in a person’s taxable income, it will not flow through to other income tests used for other purposes, such as for calculation of HECS/HELP repayments, family tax benefit or child care benefit.

Non-Arm’s Length Arrangements

Effective 1 July 2018

The Government has announced it will further tighten the non-arm’s length income rules to ensure expenses that would normally apply in a commercial transaction are included when considering whether the transaction is on a commercial basis.

This measure will require trustees to ensure that any expenses that would normally apply as part of a normal commercial transaction will also need to be taken into account when determining whether a fund will be considered to have earned non-arm’s length income, which will be taxed at the top marginal tax rate.