Two proposed changes to super announced in the Government’s May 2017 Budget could have significant impacts for first home buyers and homeowners considering downsizing.
First Home Super Saver Scheme (FHSSS)
The Government’s proposed First Home Super Saver Scheme (FHSSS) will allow first home buyers to save for a house deposit through their super.
The Scheme aims to give savers access to higher investment earnings and lower fees often available through super than those generally available in ‘typical non-super’ savings accounts.
These proposals aren’t yet law
The information in this article is based on bills before Parliament that aren’t yet law. We’ll keep you updated with more details if these bills are passed.
How would it work?
The Scheme would allow first home buyers to make voluntary super contributions of up to $15,000 per year, up to a maximum lifetime limit of $30,000 per person.
It applies to voluntary contributions made since 1 July 2017, such as:
- before-tax (concessional) contributions including salary sacrifice, and
- after-tax (non-concessional) contributions.
Any compulsory superannuation guarantee contributions your employer pays won’t count towards the Scheme.
The FHSSS also excludes contributions made to defined benefit schemes. However, Defined Benefit Division (DBD) members can make voluntary or salary sacrifice contributions (through an arrangement with their employer) into their accumulation component.
If legislated, these contributions—along with associated investment earnings—can be withdrawn to buy a first home from 1 July 2018.
These contributions will still count towards the super contributions caps. If you’re considering adding more to your super, it’s worth keeping track of your contributions through MemberOnline.
am i eligible to apply?
To qualify for the Scheme, you must:
- be 18 or over
- not previously have owned property in Australia
- be intending to purchase a residential home or land you intend to build a home on, and
- occupy the property for at least six months in the first year of ownership after it’s practical to do so.
You’ll have 12 months from the time you release the savings from your super to purchase a home.
If you don’t comply with the rules, you’ll need to re-contribute the funds into your super or pay tax equal to 20% of the amount released.
How to apply
The ATO will assess eligibility for the Scheme—including the amount of earnings that can be released—and instruct super funds to release eligible contributions.
Another housing-related proposal tabled by the Government would allow eligible homeowners to make ‘downsizer’ contributions to super from the sale of the family home.
If legislated, members aged 65 or older will be able to make contributions of up to $300,000 into super accounts from family home sale proceeds from 1 July 2018.
The existing after-tax (non-concessional) contributions caps won’t apply to downsizer contributions.
However, these contributions will count towards the member’s total superannuation balance.
For couples, each member may be able to take advantage of these new rules to make additional contributions into super.
Am i eligible to apply?
The ATO will assess eligibility to make downsizer contributions, issuing a form to be submitted along with the contribution to super funds.
Interested in taking advantage of these measures if they pass?
We encourage you to speak with a financial adviser about whether these schemes would suit your personal circumstances, and to ensure you’re aware of potential tax implications.