Financial Planning

The super scheme for first home buyers

You’re moving into your new home; corks are popping and there are smiles all around – classic advertising that for many seems unattainable.


Although many Australians may want to bash the banks over tighter home lending criteria, it’s the bank regulator, the Australian Prudential Regulatory Authority (APRA) that has set these requirements to address the risks in the mortgage market. Low deposits were increasing the risks carried by lenders.


A poll conducted by MoneySmart showed that 43% of Australians don’t save. Of the number who are saving, only 16% are doing it comfortably.


The reasons are varied, but for the most part, modern families are over-burdened with commitments and more pressing priorities. Meanwhile, home ownership slips further away.


But fear not!


In December 2017, the First Home Super Saver (FHSS) Scheme was legislated.


In a nutshell, the scheme allows you to save your first home deposit within your complying super fund; meaning that you can take advantage of the tax and savings benefits unique to superannuation.


If it seems too good to be true, it’s not – but it could be. You’ve heard the term, ‘conditions apply’? Well this is no exception.


Read the fine print: the FHSS scheme is strictly regulated – after all superannuation’s ultimate goal is to preserve your savings until retirement.


Further, not everyone is eligible. To qualify, you must not have owned property in Australia; have never previously requested an FHSS release; and promise – on pain of Tax Office strife – not to use FHSS money to purchase a non-occupiable property, motor home, houseboat or vacant land. And not all super funds will be permitted to participate in this scheme.


So, let’s see how the figures stack up.


Say you’re putting $500 per month into a savings account earning around 2% per annum interest. You’ve paid tax on that money, at your marginal rate, so already you’re behind. But the kicker is that you must pay tax on the 2% earnings as well.


Not floating your boat?


Taking care not to exceed your annual contributions cap, consider contributing the same monthly $500 to an FHSS Scheme. Post-tax contributions to super are subject to a flat 15% contributions tax – and no tax on the earnings. Those choosing to salary sacrifice their contributions can use pre-tax money.


To access these funds for a deposit, you must wait until after 30 June 2018 and apply to the Commissioner of Taxation. You can apply for the release of eligible FHSS contributions up to $15,000 over one financial year, to a total of $30,000 over all years. You then have 12 months from the release date to purchase your first home.


Accumulated savings not used for your deposit will remain in your super fund, contributing to your long-term retirement plan.


There may be tax implications so seek professional advice before making any decisions.


The FHSS scheme may not be for everyone as some people feel that tying their cash up in a super fund is too restrictive; they’d prefer to maintain access to their money. Since the scrapping of the home saver account scheme, savers looking for cash accessibility and flexibility can consider a regular savings plan or a term deposit.


It all comes down to what suits you and your lifestyle. Chat with your financial adviser and work out the best way to take your first step towards your first home… and that bottle of bubbly!

House sharing? Here’s a good tip

When you move in with a friend or partner, make sure the utility bills for services to the property are in joint names. There are two good reasons for this:


1. Having both names on these accounts will help to build each person’s credit rating;


2. If your friend/partner moves out, they are still responsible for paying their share of the expenses incurred during their stay.


In the case of a split, both parties should make sure the name/s on each account are updated immediately after the joint bill has been paid and bond refunded.

CGT Relief Analysed – Ten simple tips for understanding CGT relief!


Ten simple tips for understanding CGT relief!


1.    You must be affected by the Transfer Balance Cap (this means rolling back funds into accumulation) or have a TRIS not in retirement phase just before 1 July 2017.


2.    CGT relief applies on an asset by asset basis. You do not need to apply it to all of the SMSF’s eligible assets.


3.    You must have held the asset on 9 November 2016 and not sold it before 30 June 2017.


4.    CGT relief locks in the Capital Gains Tax treatment of unrealised capital gains on pension assets by resetting their cost base to market value.


5.    The CGT discount period restarts from the time the asset’s cost base is reset.


6.    All assets that were segregated pension assets (includes 100% pension funds) on 9 November 2016 will effectively be tax free at the time they stop being segregated pension assets.  (You will need an actuarial certificate for the time after this date if you are adopting the proportionate method.)


7.    All assets that were unsegregated pension assets will lock in their capital gains on 30 June 2017. You can defer gains (not losses) until the asset is sold.


8.    Unless specific assets are rolled back, CGT relief can potentially be applied to all of the funds’ assets, regardless of the actual amount rolled back.


9.    Funds that had unsegregated pension assets and moved into segregated pension assets (100% pension funds) between 9 November 2016 and 30 June 2017 will not get any CGT relief.


10.    Your choice is irrevocable and must be made when your 2016-17 SMSF annual return is due by completing the CGT schedule.


Consider the following when making your choice:


• Asset cost bases and market values               • Your fund’s ECPI and future ECPI

• When members will enter retirement phase    • Future and current capital losses

• Deferral of capital gains                                   • The future market value and sale of assets


Published by:

Get your $20,000 instant asset write-off


If you buy an asset before 1 July 2017 and it costs less than $20,000, you can immediately deduct the business portion in your 2017 tax return.


You are eligible to claim a deduction for the business portion of each asset (new or second hand) costing less than $20,000 if:

–        you have a turnover less than $10 million (this has increased from $2 million), and

–        the asset was first used or installed ready for use in the 2016-17 income year.


Assets that cost $20,000 or more can’t be immediately deducted. They will continue to be deducted over time using a small business asset pool. You write-off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.


In the Budget 2017, the government announced an extension of the $20,000 instant asset write-off threshold to 30 June 2018. This extension still needs to be passed in parliament – the threshold currently reduces to $1,000 from 1 July 2017.


To find out more please call R A Carroll Accounts on (02) 4735 7122 or


Utilise the $540,000 Non-Concessional Contribution with your commercial property.

With the changes coming into effect 1 July 2017 the maximum Non-Concessional Contribution (NCC) a member will be able to make is reducing from $180,000 to $100,000. This being the after tax contribution allowed in any one year.


Due to this, the bring forward provision will also decrees. This provision allows a member to bring forward three years of NCCs to be utilised at once. Currently if a member has not made any NCCs in the 2014/15 and 2015/16 financial years, that member would be entitled to make a full NCC of $540,000 ($180,000 x 3). After 1 July this will reduce to $300,000 ($100,000 x x3)


One way to utilise the maximum NCC of $540,000 prior to 1 July, is to transfer business real property owned by the member in their personal name into their SMSF, effectively treating up to $540,000 of the value of the property as a NCC for the transferring member.


For example, John and Lisa are members of a SMSF.  John owns business real property in NSW in his personal name with a market value of $1,000,000.  John wants to transfer $540,000 of the property by way of NCC and then pay the remainder $460,000 from his member balance in his SMSF.


In NSW this type of transaction attracts concessional stamp duty of $500 provided certain requirements are met, including:

1.    The property must be “business real property” in NSW.

2.    The member must own and hold the property in their personal capacity (ie, not as trustee of a trust).

3.    The property once transferred into the SMSF must be “segregated” for the benefit of John only (being the person who transferred the property) and this is irrevocable (this means once the property is transferred into the SMSF only John will benefit from the property (ie, any incoming rent from that property is credited towards John’s member account and not Lisa’s account).

4.    The transfer must be at market value (the property will need to be valued by an independent qualified valuer).


If John did not have sufficient funds in his member account in the SMSF to pay $460,000, John could transfer a part interest in the property to the SMSF.  In our example, John could transfer a 54% interest in the property into the fund as a NCC with the end result of the property being held as follows:

•    46% share by John in his own capacity; and

•    54% share held by the fund.


The transfer of John’s 54% interest in the property to the SMSF may be liable for only $500 duty if all the other relevant requirements were met.

SMSF 30 June checklist: need to know

by AMP Capital on 26 May 2017

It is time for self-managed super fund (SMSF) trustees to act now, to ensure their fund complies with the new superannuation rules before they come into force on 1 July 2017.

From that date a raft of new measures announced at this year’s federal budget will apply to super funds. These changes are extensive and complex, so here’s a checklist of steps to consider taking to ensure your fund meets the new rules before the new financial year starts.


1. Make sure you understand all the changes


The new super regime has numerous new rules with which trustees need to comply.

So the first step is to ensure you are fully across all the changes and understand their potential to impact your fund.


2. Lodge your fund’s tax return


Greg Einfeld, director of SMSF specialists Lime Super says now is the time to lodge your 2015/16 annual return, if you haven’t done so already.


“The deadline has recently been extended from 15 May to 30 June, to provide some additional breathing space,” says Einfeld.


“But funds that lodge late will have their deadline to lodge their return for the 2015/16 year brought forward to October 2017,” he adds.


To give your SMSF as much leeway as possible to meet the new rules, it’s an idea to lodge your fund’s return on time this year.


3. Assess contributions to your fund


Lower concessional and non-concessional contribution caps take effect from 1 July, and trustees only have until the end of this financial year to take full advantage of the higher caps.


At the moment people under 50 can contribute $30,000 to their fund on a concessional basis this year and people older than this can contribute up to $35,000 to their fund on a concessional basis. From 1 July this figure is $25,000 for everyone.


Now is the time to assess whether you can contribute up to the full amount and take steps to ensure the funds are inside the SMSF before 30 June.


4. Review new transfer balance cap rules


SMSF members, especially those whose funds are in pension phase, must also ensure they comply with the new $1.6 million transfer balance cap. Under this new provision, super fund members can only hold assets valued up to this amount in their SMSF and receive concessional tax treatment.


Account-based pensions, complying pensions and annuities within super are included in the $1.6 million cap. Transferring funds from pension to accumulation stage can help trustees ensure they stay under the cap.


5. Reconsider whether transition to retirement strategies are worthwhile


Transition to retirement pensions won’t be as tax effective in the future. They may still make sense for SMSF members who use them for their intended purpose, which is to continue to contribute to super from a salary while winding down work and at the same time draw a pension to top up income. But for many other people they won’t be as tax-effective as they have been from 1 July.


“The removal of the tax-exempt status from earnings on fund investments for those using transition to retirement pensions is a change where specialist advice could prove invaluable to trustees,” says Maroney.


6. Look into CGT relief


Now is also the time to create an action plan to work out whether your fund should take advantage of the CGT relief afforded to funds affected by the transfer balance cap and transition to retirement changes.


“The CGT relief rules allow funds to reset the cost base of assets affected by the law changes before the end of the financial year. This is a valuable but one-off opportunity for SMSF members to minimise the impact of the law changes on their retirement savings,” Maroney advises.


The federal government made few changes to superannuation in this year’s budget, giving trustees the opportunity to ensure they are fully compliant with last year’s changes.


“Remember, there is only about five weeks to go until the end of the financial year. Getting the right advice now could help trustees to set up their SMSFs in an efficient way for when the new regime takes effect from 1 July,” he adds.

Consumer inflation higher but no concerns yet

Unlike the weeks prior to recent CPI reports, the level of attention given to this latest CPI report has been relatively scant. The latest RBA board meeting minutes indicate Australia’s central bank is focussed on the employment market and risks in the housing markets (Sydney and Melbourne). Mentions of underlying inflation were mostly limited to stating how any rise was expected to be gradual. While some commentators noted the importance of the upcoming CPI report, other issues, such as Trump’s tax plans, tended to divert attention away from it.


Michael Blythe, Commonwealth Bank

The main message from the CPI is that inflation rates remain low ‑ but the low point is behind us.  And inflation rates will grind slowly higher from here…It is difficult to get concerned about inflation prospects when wages growth and labour costs remain very well contained. Nevertheless, the housing component of the CPI may only add to RBA concerns about the housing market more broadly.  New dwelling purchase costs, closely correlated with house prices, was highlighted by the ABS as one of the most significant price rises in Q1.