From 1 July 2018, new laws come into effect allowing first home buyers to use their super to help buy a home, and at the other end of the spectrum, downsizers to contribute proceeds from the sale of their home to super without many of the normal restrictions.
First Home Super Saver Scheme
The First Home Super Saver Scheme (FHSS) enables first-home buyers to save for a deposit inside their superannuation account, attracting the tax incentives and some of the earnings benefits of superannuation.
Home savers can make voluntary concessional contributions (for example by salary sacrificing) or non-concessional contributions (voluntary after-tax contributions) of $15,000 a year within existing caps, up to a total of $30,000.
When you are ready to buy a house, you can withdraw the contributions along with any deemed earnings, to help fund a deposit on your first home. When the amount is released from super, it is taxed at your marginal tax rate less a 30% offset (non-concessional contributions are not taxed). Note that superannuation guarantee contributions cannot be withdrawn under this scheme.
The upside of the FHSS is the tax benefit. For example, if you earn $70,000 a year and make salary sacrifice contributions of $10,000 per year, after 3 years of saving, approximately $25,892 will be available for a deposit under the scheme – $6,210 more than if the saving had occurred in a standard deposit account (you can estimate the impact of the scheme on you using the estimator).
Another upside is that the scheme applies to individuals. So, if you are a couple, you both could utilise the scheme for a deposit on the same home – effectively increasing your cap to a maximum of $60,000.
Home savers need to move into the property as soon as practicable and occupy it for at least 6 of the first 12 months that it is practicable to do so. The home saver scheme can only be used once by you.
In order to take part in the FHSS, you must:
– Be 18 years of age or older and
– Never had held taxable Australian real property
Contributing proceeds from the sale of your home to super
From 1 July 2018, if you are over 65, have held your home for 10 years or more and are looking to sell, you might be able to contribute some of the proceeds of the sale of your home to superannuation.
The benefit of this measure is that you can contribute a lump sum of up to $300,000 per person to superannuation without being restricted by the existing work test requirements, non-concessional contribution caps or total superannuation balance rules. It’s a way of building your superannuation quickly and taking advantage of superannuation’s concessional tax rates. If you are considering using this initiative, it will be important to get advice to ensure that you are eligible to use this measure and the contribution does not adversely affect your overall financial position.
The eligibility requirements include:
– The contribution from the sale is made to a complying superannuation fund
– The contribution is equal to or less than the capital proceeds from the disposal of a main residence
– The member or their spouse had an eligible interest in the main residence before the sale
– The member, their spouse, their former spouse, or trustee of the deceased estate held an interest in the house during the prior 10 years
– No prior downsizer contribution has been made
