Treasurer Scott Morrison delivered his second federal budget on Tuesday 9 May, including a key measure aimed at tackling housing affordability for first home buyers.
From 1 July 2017, first home buyers will be allowed to make salary-sacrifice contributions to their superannuation fund that, along with the related earnings, can be withdrawn for a first home deposit. Significantly, both members of a couple can take advantage of this measure and combine savings for a single deposit to buy their first home together.
As part of the proposal, salary-sacrifice contributions will be taxed as per current super contributions and withdrawals taxed at the marginal rate, less 30% offset.
Combined with the existing concessional tax treatment of contributions and earnings, this may reduce the time it takes for first home buyers to save a deposit.
Other key points to note:
- Contributions will be capped at $30,000 per person, and $15,000 a year (within the existing $25,000 concessional super cap)
- Contributions can be made from 1 July 2017, and withdrawals from 1 July 2018.
Changes to the Medicare Levy
Another notable change that will impact salary packaging is the proposed increase in the Medicare Levy from 2% to 2.5% to ensure the full funding of the National Disability Insurance Scheme (NDIS). Effective 1 April 2019, this is likely to lead to an increase in the FBT rate, expected to apply from 1 April 2020. For PBI employers, this may also impact the $17,000/$30,000 tax-free caps and the $5,000 Meal Entertainment cap.
Changes to HECs debt repayment
Also influencing salary packaging is a proposal that will see the income level at which HECS debt repayments commence reduced from $55,000 (including reportable fringe benefits and salary packaged superannuation) to $42,000, effective 1 July 2019.
We will be in touch with our valued customers to ensure that they understand the changes and how they may be affected by them.
