As we head into the new year it may be timely to review some of the important changes that have been made to superannuation and tax legislation that could be useful to Australians of all ages. Some of these opportunities are already in place, and others will take effect in the next financial year. Below are some of the measures.
First home deposit
Voluntary super contributions made since 1 July 2017, may now be withdrawn by a first home buyer under the First Home Super Saver Scheme. The scheme allows eligible first home buyers to save their deposit in the concessionally taxed superannuation environment, which is generally more beneficial than saving in an individual’s name, where interest is taxed at higher marginal rates.
Instant asset write-offs
Small business owners may be able to claim an immediate tax deduction of up to $20,000 when purchasing certain assets before 30 June 2019. Thereafter, the claimable amount reduces to $1000, so it will be an important consideration for business people when setting capital budgets. It may be worth bringing forward some expenditure.
Catch up super contributions
Super fund members, who make concessional contributions of less than the cap of $25,000 in 2018/19, may be able to contribute more than the cap amount in 2019/20 and beyond. This could enable catch up super contributions to be made in future financial years. Concessional contributions include all employer contributions (super guarantee and salary sacrifice), personal contributions claimed as a tax deduction and certain other amounts. We believe this will be a very beneficial change in legislation. It will certainly assist people who have variable incomes and may not be able to make full contributions in some years, but would like to save more in the good years.
Super work test exemption
A very recent piece of legislation, which was only enacted on 7th December 2018 provides a one-year exemption from the work test for eligible Australians seeking to maximise their super investments. It has long been a frustration for many older Australians that they are unable to contribute to superannuation past age 65 unless they meet a work test. The government will now allow an extra year in which to make voluntary superannuation contributions. However, it must be the first year in which they do not meet the work test after 1 July 2019. In other words, you cannot simply retire at age 65 and look to make a contribution at age 70. There must still be a connection with recent work.
Another important condition is that it is only available to retirees who have total superannuation balances of less than $300,000. Nevertheless, it will be a useful addition to the various conditions that allow superannuation accumulation.
Although this is not new legislation, it is definitely worth revisiting. Those over age 65 who sell their home after 1 July 2018, and have owned that home for more than 10 years, are eligible to contribute up to $300,000 per person to superannuation. This legislation does not require a work test and may be an invaluable tool for older Australians to access the super environment. We have already been considering this for a number of our clients.
HECS and HELP debts
Some not-so-good news for graduates with HECS and HELP debts. Currently, these student loans do not require repayment until $51,957 or more is earned. That limit is being reduced to $45,881 from 1 July 2019. Repayment rates will also change and for the first time a lifetime debt limit will be introduced.
Amongst all the complexity, there remains opportunities for Australians who have aspirations to achieve financial independence and we will certainly assist our clients in taking advantage of these opportunities where appropriate.