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From the Treasurer, Scott Morrison:

On the demand side, for those who are trying to save to buy their first home, we will support them by providing a tax cut on their first home deposit savings.

First home buyers will be able to save for a deposit by salary sacrificing into their superannuation account over and above their compulsory superannuation contribution from July 1.

The First Home Super Savers Scheme will attract the tax advantages of superannuation. Contributions and earnings will be taxed at 15 per cent, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less 30 percentage points.

Savers will not have to set up another account, they can just use their existing super account and decide how much of their income they want to put aside to save for their first home deposit.

Contributions will be limited to $30,000 per person in total and $15,000 per year.

Under this plan, most first home savers will be able accelerate their savings by at least 30 per cent.

We will encourage older Australians to free up housing stock, by enabling downsizers over the age of 65 to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.

And on demand management, we will continue to prefer the scalpel to the chainsaw, to avoid a housing shock.

Mum and dad investors will continue to be able to use negative gearing, supporting the supply of rental housing and placing downward pressure on rents. FULL SPEECH

The Financial Planning Association of Australia (FPA) welcomed measures to encourage older property owners to downsize in the Federal Budget, but cited concerns with increased complexity to the superannuation system.

FPA CEO Dante De Gori CFP® said: “A person aged 65 or over will be able to make a non-concessional contribution to superannuation of up to $300,000 from the proceeds of selling their home from 1 July 2018.

“The aim of this incentive is to encourage the baby boomer generation to sell, freeing up larger houses for younger families upgrading into more suitable homes. We support this initiative, however these changes add to the complexity of the superannuation system and are only tinkering with the housing affordability problem.

“First home buyers will be able to withdraw voluntary contributions to superannuation made from 1 July 2017, along with associated deemed earnings, for a first home deposit. Under the measure, up to $15,000 per year and $30,000 in total can be contributed, within existing caps. Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30 per cent offset. Both members of a couple can take advantage of this measure to buy their first home together.

While the FPA supports initiatives to make housing more affordable, the association says accessing super is not the solution to the housing affordability issue, and is not in the national interest.

“Our members, who provide advice to millions of Australians, are concerned that changes that reduce retirement savings of future retirees, will only add extra pressure on the age pension.” FULL STATEMENT

The SMSF Association similarly supported the downsizing and first-home buyer announcements.

On downsizing, SMSFA CEO John Maroney said: “This means people can make a significant top-up contribution to their super funds, allowing them to fund a dignified and secure retirement. While the measure may not be a significant trigger to encourage downsizing, we welcome the ability for older Australians to top up their superannuation where downsizing their home provides them with funds to do so.

“On the first-home buyer scheme, he said: “This scheme offers superannuation funds, including the SMSF sector, an excellent opportunity to engage younger fund members in their superannuation.” FULL STATEMENT

The Association of Superannuation Funds of Australia (ASFA) was pleased with both the downsizing concessions for retirees and the first-home buyer super scheme.

“There will be some retirees who want to move to more suitable housing or put money aside from selling the family home to cover essential living or health care costs. This measure can improve flexibility and living standards in retirement, while boosting supply of family homes.

“Dr Fahy said a new first home super saver scheme would enable voluntary contributions to super and associated deemed earnings from 1 July 2017 to be withdrawn for a first home deposit.

“One potential benefit of this policy is that it will encourage young Australians to engage with their super earlier in life,” he said. FULL STATEMENT

The Actuaries Institute said it was pleased super announcements were broadly supportive of a self-funded retirement. “Overall the Federal Government has continued down the path of encouraging people to save for their own retirement, with few changes this year after major policy announcements in the 2016-17 Budget,” said Institute President Jenny Lyon. FULL STATEMENT

The Property Investment Professionals of Australia (PIPA) was broadly supportive of the housing affordability package, particularly the fact the government did not make changes to negative gearing or capital gains tax.

“We think it is an improving and sensible approach to stabilise the housing market. These measures also give confidence to people who invest in property to provide rental housing and to their family in terms of future financial wellbeing,” PIPA chair Ben Kingsley said.

But Mortgage Choice said the measures would not address the affordability crisis.

“Anyone expecting a ‘big bang’ from the 2017-18 Federal Budget in terms of addressing housing affordability, will have been left sorely disappointed,” Mortgage Choice chief executive officer John Flavell said. “There were no silver bullets, no truly substantive changes, just an ineffective spray of pops and fizzles.

Stockspot warned the first-home buyer scheme could put young buyers at risk if the market turns.

“Tax concessions within super to encourage young people buy property geared to the eyeballs at this point in the cycle is crazy. The average Sydney property price would only need to fall by 3 per cent to wipe out the entire $30,000 saved from the First Home Super Savers Scheme,” CEO Chris Brycki said.

Banking measures

From the Treasurer, Scott Morrison:

For the system to be fairer, there needs to be greater competition and accountability – now.

In response to the Ramsay Review, we are establishing a simpler, more accessible and more affordable one-stop shop for Australians to resolve their disputes and obtain binding outcomes from the banks and other financial institutions, to be known as the Australian Financial Complaints Authority.

A new Banking Executive Accountability Regime will be introduced, requiring all senior executives to be registered with APRA. If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their significant bonuses.

Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements.

If banks breach misconduct rules, they will also face bigger fines starting at $50 million for small banks and $200 million for large banks.

As recommended by the Coleman Committee, a permanent team will be established within the ACCC to investigate competition in our banking and financial system.

The introduction of an open banking regime in 2018 will give customers greater access to their own data, empowering them to seek out better and cheaper services.

Tonight, I also announce a new six-basis point levy on the big banks’ liabilities, starting on July 1.

This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks.

The levy will only affect our five largest banks with assessed liabilities of $100 billion or more and does not apply to superannuation funds or insurance companies.

Importantly, customer deposits of less than $250,000 and additional capital requirements imposed on the banks by regulatory authorities are excluded from their assessed liabilities.

Unlike the previous bank deposit tax, this is specifically not a levy on pensioners’ and others’ ordinary deposit accounts, nor is it on home loans.

This measure will secure $6.2 billion over the Budget and forward estimates to support budget repair, including the reversal of significant budget savings measures. FULL SPEECH

From the industry:

The Association of Financial Advisers (AFA) is pleased to see the Government introduce a Banking Executive Accountability Regime impacting banks and their senior executives. “Over the past five or more years, the financial advice profession has been raising the bar on professional standards and accountability. We congratulate the Government for extending these measures to the senior executives who play a pivotal role in shaping the behaviour and culture of our major institutions as we believe they will further strengthen consumer trust in the financial services profession as a whole,” said CEO Philip Kewin. FULL STATEMENT

FPA CEO Dante De Gori queried what the 0.06 per cent levy would be used for.

“There is a question about what the funds raised will be used for and if the tax will be passed onto customers. This will only increase the cost of borrowing and will likely have a knock-on effect for the economy,” said De Gori. FULL STATEMENT

The Australian Bankers’ Association (ABA) lambasted the levy on banks. “If the Government thinks major banks can afford to pay a new tax, it should make every company in Australia which earns more than banks wonder who’s next,” CEO Anna Bligh said. FULL STATEMENT

Similarly, NAB expressed dissatisfaction with the announcement. CEO Andrew Thorburn said: “The major bank tax will impact millions of everyday Australians who are employees, customers or shareholders of banks. It is not just a tax on a bank. It is a tax on every Australian who benefits from, and is part of, our industry.”

Commonwealth Bank CEO Ian Narev said he awaits further detail from Treasury. “As with the many recent new regulatory imposts, we need to take some time to work through the implications. This is particularly so given the lack of detail and the absence of any consultation. However, as every business owner or employee knows, every extra cost needs to be borne by customers or shareholders, or a combination of both. We look forward to Treasury outlining how this tax will apply in practice. Once we have received all the details on the new tax, we will do our best to strike the right balance to ensure we continue to enhance the financial wellbeing of people, businesses and communities.”


Professional Planner, Online, 10 May 2017