Issue 875, 25 October 2022-23 Budget Edition
In this issue:
Overview
The most noteworthy announcement in this year’s Federal Budget is the Housing Accord, which will offer new opportunities for investment into affordable housing by institutional investors, including superannuation funds.
There is only one, previously announced, superannuation specific measure – the expansion of eligibility to make a downsizer contribution from age 60 to age 55.
The Government has also provided certainty on unlegislated tax and super measures announced by the previous Government, indicating that some measures will not proceed and other measures will have their start date deferred.
Details of specific superannuation measures
Housing Accord
The Australian Government has announced that it will provide $350 million over 5 years from 2024 / 2025 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments and other key stakeholders.
The Accord will seek to facilitate superannuation and institutional capital investment in social and affordable housing, alongside established state and territory programs. The Commonwealth support will include availability payments over the longer term, to incentivise institutional investment through covering the gap between market rents and subsidised rents.
The Government will collaborate to improve financing, including by the provision of availability payments and other innovative financing techniques, through the Housing Australia Future Fund (HAFF) and/or the National Housing Infrastructure Facility. This measure complements the Government’s investment in the HAFF, which will provide a further 30,000 social and affordable homes over 5 years.
The Treasurer’s Investor Roundtable, a newly established forum, will bring together leaders from the investment community, including from some of Australia’s largest superannuation funds, in November to explore further areas of work to promote investment in housing.
The Government has stated that, as some immediate actions under the Accord, it is seeking commitment from institutional investors, including superannuation funds, to
- endorse the Accord and commit to increase investment in affordable housing where it is in the best financial interests of investors or super fund members to do so
- commit to working constructively with Accord parties and other institutional investors to optimise policy settings that facilitate institutional investment in affordable housing
- build on constructive discussions to date to further develop workable financing approaches that will best leverage institutional capital to increase the supply of social and affordable housing. This will include working on the importance of scale, the risk return profile of debt and equity exposure, and a clear investment pipeline.
The Government has also identified, as an area for further work under the Accord, that it is looking for institutional investors, including superannuation funds, to:
- participate in, and support, the development of the National Housing and Homelessness Plan, with a view to supporting reforms that will encourage more institutional investment in housing.
Superannuation – expanding eligibility for downsizer contributions
As announced previously, the Government will allow more people to make downsizer contributions to their superannuation, by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect from the start of the first quarter after Royal Assent of the enabling legislation.
The downsizer contribution allows people to make a one-off, post-tax, contribution to their superannuation from the proceeds of selling their home of up to $300,000 per person. Both members of a couple can make a contribution, and contributions do not count towards an individual’s non-concessional contribution cap.
This measure provides greater flexibility to contribute to superannuation and aims to encourage older Australians to downsize sooner to a home that better suits their needs, thereby increasing the availability of appropriate housing for Australian families.
In addition, the Government is
- changing the asset test, by extending the exemption from pension asset testing of the proceeds of sale of the principal home from 12 months to 24 months; and
- changing the income test, to apply only the lower deeming rate (0.25 per cent) to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
This measure will reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up suitable housing stock for younger families.
Providing certainty on unlegislated tax and super measures announced by previous Government
The Government has determined that it will not proceed with a number of legacy tax and superannuation measures that were announced, but not legislated, by the previous Government, including:
The 2013-14 MYEFO
- Measure that proposed to amend the debt/equity tax rules.
The 2016–17 Budget
- Measure that proposed changes to the Taxation of Financial Arrangements (TOFA) rules.
- Measure that proposed changes to the taxation of asset-backed financing arrangements.
- Measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles.
The 2018–19 Budget
- Measure that proposed changing the annual audit requirement for certain Self-Managed Superannuation Funds (SMSFs).
- Measure that proposed introducing a requirement for retirement income product providers to report standardised metrics in product disclosure statements.
Further, the Government will defer the start dates of a number of legacy tax and superannuation measures to allow sufficient time for policies to be legislated and implemented, including:
The 2021–22 Budget
- Measure that proposed relaxing residency requirements for SMSFs, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.
- Measure that proposed making technical amendments to the TOFA rules, from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.
Other measures that may affect superannuation funds
Right to superannuation is to be included within the National Employment Standard
To further strengthen the superannuation system, the Government has stated that it is committed to including a right to superannuation within the National Employment Standards, which will give workers the power to pursue their unpaid superannuation as a workplace entitlement.
International Tax – Australia-Iceland Tax Treaty
On 12 October 2022 the Government signed the Convention between Australia and Iceland for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.
The Convention facilitates trade and investment between Australia and Iceland by relieving double taxation, lowering withholding tax rates and improving certainty for taxpayers in both countries. It also gives effect to the G20/OECD Base Erosion and Profit Shifting recommendations, in accordance with the Government’s commitment to tax integrity.
Improving the integrity of off-market share buy-backs
The Government will improve the integrity of the tax system by aligning the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. This measure will apply from announcement on Budget night.
Fighting Online Scams
From 2022 / 2023 the Government will provide $12.6 million over 4 years to combat scams and online fraud to protect Australians from financial harm. Funding includes
- $9.9 million over 4 years from 2022–23 to the Australian Competition and Consumer Commission for initial work on the establishment of a National Anti-Scam Centre
- $2 million in 2022–23 to the Department of Home Affairs to expand its arrangement with IDCARE to provide specialist identity support services, including identity recovery services and counselling for victims of identity theft
- $0.7 million in 2022–23 to the Treasury to raise public awareness of the risk of scams
New cyber security measures for government agencies
In 2022 / 2023 the Government will provide $31.3 million in additional funding to provide cyber security services to government agencies with fewer resources as part of its ‘whole-of-Government’ Cyber Hub program uplift package.
APRA performance measure
APRA has stated that one of its performance measures for 2022/2023 is to reduce the number of:
- superannuation members exposed to unsustainable funds
- funds with sub-standard practices
- MySuper and Choice superannuation members in high fee or poor performing offerings.
ATO performance measures regarding the Superannuation Guarantee
The ATO has specific performance measures with respect to the Superannuation Guarantee (SG) around:
- reducing the SG gap as a proportion of SG contributions to a level as low as practicable, given the nature and complexity of the law and the resources available. The result for the 2019/2020 year was 4.9% or $3,370 million
- rasing and collecting the SG charge
- distributing SG entitlements to individuals or superannuation funds
- achieving levels of SG debt on hand / irrecoverable at law or uneconomical to pursue.
Commonwealth Penalty Unit – increase in amount
From 1 January 2023 the Government will increase the amount of the Commonwealth penalty unit from $222 to $275.
The increase will apply to offences committed after the relevant legislative amendment comes into force.
The amount will continue to be indexed every 3 years in line with the CPI as per the existing schedule. Penalty units are used to describe the amount payable for fines under Commonwealth laws, including in relation to communication, financial, tax and fraud offences. Fines are calculated by multiplying the value of one penalty unit by the number of penalty units prescribed for the offence.
This measure ensures that financial penalties for Commonwealth offences continue to remain effective in deterring unlawful behaviour and contribute to budget repair
Incentivising pensioners into the workforce
From 2022 / 2023 the Government will provide $61.9 million over two years to provide age and veterans pensioners a once off credit of $4,000 to their Work Bonus income bank.
The temporary income bank top up will increase the amount pensioners can earn in 2022 / 2023 before their pension is reduced from $7,800 to $11,800, supporting pensioners who want to work or work more hours to do so without losing their pension entitlements.
Lifting the Income Threshold for the Commonwealth Seniors Health Card
The Government will increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
The Government will also freeze social security deeming rates at their current levels for a further two years, until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
