Treasurer Josh Frydenberg has revealed the latest federal budget, and it is mostly good news for property investors. We’ve teamed up with Katie Timms, a Director in RSM Australia’s Business Advisory division to analyse the latest federal budget and how it may impact you.
Here’s what you need to know.
Superannuation Downsizer Scheme
As some people predicted before Tuesday night, the age limit for those eligible to make downsizer contributions to their superannuation has decreased from 65 to 60.
The Superannuation Downsizer Scheme allows for a one-off, post-tax contribution of up to $300,000 per person ($600,000 per couple) from the sale of their home into their superannuation. Downsizers don’t currently need to be living in the home to benefit, however, the property must have previously been their main residence for 10 years in order to qualify.
Targeted at older Australians, this scheme encourages people to consider downsizing to a home that better suits their needs, while also freeing up housing stock for growing families.
Katie advises that the success of the original Downsizer contribution was a welcome surprise, and it is even better that is has been further widened to include those between 60-65. For so many investors and retirees, the available cash to contribute to superannuation isn’t available until later in life. While the scheme may not be enough for people to consider selling and relocating in itself, it does provide an opportunity to maximise superannuation. Property investors may want to carefully consider when to use the downsizer contribution – an individual at age 60 may not have access to their superannuation yet – and for which property – remember, it only needs to have been a main residence at some point of ownership, not at the time of sale.
Voluntary superannuation contributions
Under a new policy announced in the budget, older Australians aged 67-74 will now be able to make or receive non-concessional and salary sacrifice superannuation contributions without needing to meet the work test.
Under current rules, people in the 67-74 age bracket must work at least 40 hours during a 30-day window in order to make voluntary superannuation contributions.
By repealing the work test, it will now be simpler and easier for older Australians to make contributions to their superannuation.
Katie believes this is a welcome change, and one that is considered long overdue by industry. It unfairly limited those who chose to dispose of assets outside of superannuation until after retirement, or until after businesses were sold, and even those who may not have had available cash flow to contribute to superannuation until later in life. While the Government attempted to rectify this in previous announcements by increasing the work test age, and by offering a one-off exemption to the work test for individuals with low balances, this created a far more complicated system than was necessary.
Given that the work test still needs to be met for a personal deductible contribution it’s not quite as favourable as we would have liked, but even this partial repeal is a step in the right direction.
If you would like to discuss your property goals in more detail, contact us for an obligation-free consultation.