Downsizing contributions into superannuation

More information hereFrom 1 July 2018, the Australian Government will introduce the Contributing the proceeds of downsizing into superannuation (downsizing) measure. This measure is part of a package of reforms to reduce pressure on housing affordability in Australia.

This measure applies to the sale of your dwelling (your home), which was your main residence, where the exchange of contracts for the sale occurs on or after 1 July 2018.

If you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made if an individual has a total super balance greater than 1.6 million.

Your downsizer contribution will not affect your total super balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of the financial year.

The downsizer contribution will also count towards your transfer balance cap, currently set at $1.6 million. This cap applies when you move your super savings into retirement phase.

You can only make downsizing contributions for the sale of one home. You can’t access it again for the sale of a second home.

Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.


Eligibility for the downsizer measure


You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale
  • your home is in Australia and is not a caravan, houseboat or other mobile home
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset
  • you have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

More information here


Budget 2018 update – Superannuation insurance opt-in rule for younger and low-balance members

The Government will change the insurance arrangements for certain cohorts of superannuation members from 1 July 2019. Under the proposed changes, insurance within superannuation will move from a default framework to be offered on an opt-in basis for:

  • members with low balances of less than $6,000;
  • members under the age of 25 years; and
  • members with inactive accounts that have not received a contribution in 13 months.

These changes seek to protect the retirement savings of young people and those with low balances by ensuring their superannuation is not unnecessarily eroded by premiums on insurance policies they do not need or are not aware of. The Minister for Revenue and Financial Services, Kelly O’Dwyer, said around 5 million individuals will have the opportunity to save an estimated $3 billion in insurance premiums by choosing to opt-in to this cover, rather than paying for it by default.

The changes also seek to reduce the incidence of duplicated cover so that individuals are not paying for multiple insurance policies, which they may not be able to claim on in any event. Importantly, these changes will not prevent anyone who wants insurance from being able to obtain it. That is, low balance, young, and inactive members will still be able to opt-in to insurance cover within super.

In addition, the Government said it will consult publicly on ways in which the current policy settings could be improved to better balance the priorities of retirement savings and insurance cover within super.

Date of effect

The changes will take effect on 1 July 2019. Affected superannuants will have a period of 14 months to decide whether they will opt-in to their existing cover or allow it to switch off.

Source: Budget Paper No 2 [p 36]; Minister for Revenue and Financial Services, media release, 8 May 2018

Budget 2018 update – Additional funding for Single Touch Payroll to assist small businesses

Single Touch Payroll will commence for employers of over 20 people on 1 July 2018.

The Government will provide an addition $15 million over 3 years from the 2018-19 income year to the ATO to support the modernisation of payroll and superannuation fund reporting.

Single Touch Payroll will commence for all remaining employers in 1 July 2019.

The funding will be used to support small businesses with fewer than 20 employees during the transition to Single Touch Payroll Reporting from 1 July 2019.

Source: Budget Paper No 2 [p 185]

Budget 2018 update – ATO consolidation of small inactive super accounts to get more proactive

The Government will strengthen the ATO-led consolidation regime by requiring the transfer of all inactive superannuation accounts with balances below $6,000 to the ATO to protect them from further erosion.

The ATO will expand its data matching processes to proactively reunite these lost and low balance super accounts with the member’s active account, where possible. This measure will also include the proactive payment of funds already held by the ATO. The majority of accounts transferred to the ATO are expected to be reunited in the year they are received.

The new ATO system is expected to send $6 billion of super back to 3 million members’ active super accounts in 2019-20.

Date of effect

These changes will take effect from 1 July 2019.

Source: Budget Paper No 2 [p 35]; Minister for Revenue and Financial Services, media release, 8 May 2018

Budget 2018 update – Personal superannuation contributions – improving notice of intention to deduct

The Government announced measures aimed at improving the integrity of the notice of intent (NOI) processes for claiming deductions for personal superannuation contribution. An additional $3.1 million of funding will be provided to the ATO to develop a new compliance model for deducting personal super contributions, and to undertake additional compliance and debt collection activities.

The Government said some individuals currently receive deductions on their personal superannuation contributions but do not submit a NOI, despite being required to do so under s 290-170 of the ITAA 1997. This results in their superannuation funds not applying the appropriate 15% tax to their contribution. As the contribution has been deducted from the individual’s income, no tax is paid on it at all, the Government said.

Currently, a notice under s 290-170 of the ITAA 1997 must be given to the super fund by the time the person lodges her or his income tax return for the year in which the contribution is made or, if no return has been lodged by the end of the following income year, by the end of that following year. This requirement is even more important from the 2017-18 income year given that individuals up to age 75 can now deduct personal contributions, regardless of whether they earn 10% or more of their income from employment (provided that the other requirements are satisfied).

The ATO will also modify income tax returns to alert individuals to the NOI requirements with a tick box to confirm they have complied. The ATO is expected to provide guidance to individuals on how to comply if they have not yet done so. This seeks to ensure that any deductible contributions are appropriately taxed by superannuation funds and enable the ATO to deny deductions to individuals who do not comply with the NOI requirements.

This measure is expected to have a gain to revenue of $430 million over the forward estimates through increased compliance and collections from business owners and other non-employees.

Date of effect

1 July 2018.

Source: Budget Paper No 2 [p 39]

Budget 2018 update – SMSF member limit to increase from 4 to 6 – law to be amended

The Budget confirmed that the maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds will be expanded from 4 to 6 members from 1 July 2019. This measure was originally flagged on 27 April 2018 by the Minister for Revenue and Financial Services, Kelly O’Dwyer.

The proposed increase to the maximum number of SMSF members seeks to provide greater flexibility for large families to jointly manage retirement savings.

Given the growth in the sector to date, Ms O’Dwyer said the measure will ensure SMSFs remain compelling retirement savings vehicle.

The Government is expected to ask the Tax Office to work with industry on the design and implementation of this measure. It is not expected to have a revenue impact.

Date of effect – 1 July 2019. – Source: Budget Paper No 2 [p 40]

Budget 2018 update – Reportable payments system extended: security providers, road freight transport and computer design

The Government will extend the taxable payments reporting system (TPRS) to the following industries:

  • security providers and investigation services;
  • road freight transport; and
  • computer system design and related service

This will extend the TPRS requirements already applying to the building and construction industry.

The TPRS requirements will also be extended, from 1 July 2018, to the cleaning and courier industries under measures contained in the Treasury Laws Amendment (Black Economy Taskforce Measures No 1) Bill 2018 (see 2018 WTB 6 [148]).

Date of effect

The reporting requirements will apply from 1 July 2019 (ie next year), with the first annual report required in August 2020.

Source: Budget Paper No 2 [p 22]

Budget 2018 update – Black Economy – increase in ATO funding

The Government will provide $318.5 million over 4 years to implement additional strategies to combat the black economy.

As part of this, the Tax Office will:

  • implement new “mobile strike teams”;
  • increase its audit presence;
  • start a Black Economy Hotline (that will allow for the community to report black economy and phoenix activities);
  • improve government data analytics and data matching;
  • increase information sharing between government enforcement agencies; and
  • enhance educational activities.

By way of background, the Tax Office currently receives funding through a terminating program called the “Black Economy Taskforce: one year extension of funding for ATO audit and compliance activities” – which ceases on 30 June 2018.

The Budget papers state that feedback from industry, business and community stakeholders “supported additional resourcing to the ATO in recognition of the enforcement challenges due to the size and clandestine nature of the black economy”.

There are no details in the Budget papers and media release as to the increased audit presence. The media release does indicate, however, a desire for a more visible and targeted enforcement.

The revenue expectations linked with this expenditure are certainly impressive, namely $3 billion over the forward estimates period (ie the next 4 years).

Date of effect

The funding will commence on 1 July 2018.

Budget 2018 update – No tax deduction for non-compliant PAYG and contractor payments

Measures will be enacted to ensure that taxpayers will not be able to claim deductions for payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.

Similarly, the Government intends to remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (again despite the withholding requirements applying).

This was recommended by the Black Economy Taskforce.

The revenue expectations linked with this expenditure is quite modest, ie “a small unquantifiable gain to revenue over the forward estimates period”.

Date of effect – The measure will commence on 1 July 2019 (ie next year).

Source: Budget Paper No 2 [p 24]


Beware of scammers impersonating energy and telecommunications companies

The ACCC is warning consumers to beware of scammers impersonating energy and telecommunications providers and demanding payments.

Scamwatch has received 5000 reports of fake billing scams in the last 12 months, with reported losses of close to $8000.

“The scammers typically impersonate well known companies such as Origin, AGL, Telstra and Optus via email, to fool people into assuming the bills are real,” ACCC Deputy Chair Delia Rickard said.

“They send bulk emails or letters which include a logo and design features closely copied from the genuine provider. The bill states the account is overdue and if not paid immediately the customer will incur late charges or be disconnected.”

“Alternatively, the bill may claim that the customer has overpaid and is owed a refund or it may simply say the bill is due and ready to pay,” Ms Rickard said.

New South Wales residents reported the highest number of incidents of the fake billing scam, with 1779 households reporting being victims, compared to 1275 in Queensland and 1245 in Victoria, 485 in Western Australia, 462 in South Australia, 132 in the ACT, 117 in Tasmania and 38 in the Northern Territory.

“Older Australians should particularly be wary of emails pretending to be from utility companies, with people over 65 reporting the most fake utility billing scam incidents,” Ms Rickard said.

“I advise consumers to contact their communications or energy provider directly via the company’s official channels to verify that the email or letter is actually from them.”

“Customers should never use the contact details provided on the suspicious email or letter but instead use an independent source to locate contact details such as a past bill or the phone book.”

In one case reported to the ACCC, a customer received a fake Telstra bill in the mail. The bill stated the customer’s account was overdue and immediate payment was needed. The customer dialled the phone number provided and was asked for his date of birth and driver’s licence number to confirm his identity.

“If customers are duped into phoning scammers they will then attempt to steal as much personal information as they can,” Ms Rickard said.

Other tips on how consumers can protect themselves:

  • If you receive a bill outside of your normal billing cycle, or don’t expect to receive an overdue notice, call your provider to check whether it is legitimate.
  • If you are not a customer of the company simply delete the email.
  • Never click on links or open attachments in an email from an unverified sender – they may contain a malicious virus.
  • Never send money or give credit card details, online account details or personal information to anyone you don’t know or trust and never by email or over the phone.
  • Keep your computer secure – always update your firewall, anti-virus and anti-spyware software, and only buy from a verified source.