On Fri 21.7.2017, Treasury released a draft of the Treasury Laws Amendment (Reducing Pressure on Housing Affordability) Bill 2017 to implement two of the 2017-18 Budget measures related to housing affordability – being two that had to do with superannuation.
Treasury also released draft legislation for other measures designed to reduce pressure on housing affordability recently (see related TT article about preventing ‘non-residents’ claiming the ‘main residence’ CGT exemption).
This Housing Affordability Bill would implement the follow schemes.
- FIRST HOME SUPER SAVER SCHEME: Under the Bill, individuals would be allowed to save for their first home inside superannuation – broadly to take advantage of the concessional taxation arrangements that apply to the superannuation system. The Scheme, in essence, creates a new category of ‘release authority’ that permits a fund to release a particular amount to the member to spend on the deposit for a first house (after payment of any tax on the amount withdrawn). Withdrawals will be allowed from 1 July 2018. In operating this system the Commissioner of Taxation must make a determination of the ‘maximum release amount’ based on the individual’s past contributions and associated earnings. The contributions must be voluntary – not ’employer mandated’ (e.g. SGC contributions). The contributions amount will be capped at $15,000 pa and $30,000 in total. Any applicable fund tax on these contributions must be deducted from the contributions amount, which is at 15% on concessional/deductible contributions (also called pre-tax contributions) and nil on non-concessional contributions. The Commissioner must then add deemed earnings, which will be calculated at the ‘Shortfall Interest Rate’ (SIC) – not actual earnings. The SIC is based on the Commonwealth’s 90 day bond rate plus 3 percentage points. A return of concessionally contributed amounts will be taxed, at the member’s marginal rate, less a 30 per cent offset (in essence tax free for those on a 30% tax rate or less). Non-concessionally contributed funds would NOT be taxed on withdrawal. This Bill will amend Div 131 of the TAA1 to create this new form of release authority (around which this scheme is built). This is an amendment of the newly created Div 131 (to standardise ‘release authorities). Div 131 was created by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.
- MAIN RESIDENCE DOWNSIZING SCHEME: The draft legislation will create a Downsizing Scheme that would allow individuals, aged 65 years or over, to make non-concessional contributions, to their superannuation funds, of up to $300,000, from the proceeds of selling their main residences. The Scheme will allow these contributions to be made out of sale proceeds on contracts entered into on or after 1 July 2018. Under the Scheme, existing superannuation contribution caps and restrictions (for instance, other contribution caps and other restrictions on making voluntary contributions). However, the $1.6 million transfer balance cap would still apply, as would the Age Pension means test. This ‘downsizing’ concession will apply to a sale where the general ‘main residence’ CGT exemption applies to give a partial or full exemption. The residence must have been owned for 10 years but it only has to have been the ‘main residence’ for a part of that period. Couples can each make a contribution up to $300,000 (total $600,000) even if only one of them is on title. Contributions, however, can’t exceed the capital proceeds from the sale and the contributions must be made within 90 days of settlement of the sale (‘change of ownership’ of the residence). The concession will be available without having to ‘downsize’ in any sense – in fact there is not even an obligation to buy any other residence to qualify under the Scheme. The concession can only be claimed on the sale of one property. This concession revolves around the meaning of ‘downsizer contribution’ in new s292-102 of the ITAA97, which would be inserted by item 4, of Schedule 2 of this draft Bill.
[FJM; Treasury website: Consultation Page; draft Bill; draft EM; draft fact sheets: First Home Bill Scheme & Reducing Barriers to Downsizing; LTN 137, 21/7/17]