FEDERAL GOVERNMENT DELIVERS LEG-UP FOR FIRST HOME BUYERS AND DOWNSIZERS

Canberra Sunshine Coast Local News

In early December, the Parliament passed key elements of the Federal Government’s housing affordability plan, giving first home buyers a tax cut by allowing them to save for a deposit inside superannuation through the First Home Super Saver Scheme (FHSSS), and allowing older Australians to contribute the proceeds of the sale of their family home into superannuation.

Through the FHSSS, individuals can contribute up to $30,000 (up to $15,000 a year within existing caps) into superannuation. This means an eligible couple could contribute up to $60,000, supercharging their deposit savings. Most first home buyers will be able to accelerate their savings by at least 30 per cent using the Scheme.

The FHSSS provides a much-needed tax cut to young Australians saving for their first home. From 1 July 2018, first home buyers will be able to withdraw voluntary superannuation contributions they’ve made since 1 July 2017, along with a deemed rate of earnings, to help buy their home. This will give first home buyers a significant leg-up towards saving their deposit, helping them overcome a key barrier for getting into the housing market.

The downsizing measure removes a financial obstacle from older Australians who are considering moving to homes that better suit their needs.

From 1 July 2018, when Australians aged 65 and over sell a home they have owned for at least 10 years they may contribute up to $300,000 from the proceeds into their superannuation accounts, over and above existing contribution restrictions. Both members of a couple may take advantage of this measure, together contributing up to $600,000 from the proceeds of the sale into superannuation. This will encourage older Australians, where appropriate, to free up homes that no longer meet their needs for younger growing families.

The measures are part of the Federal Government’s comprehensive approach to housing affordability. 

More information can be found 

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Q&A

 

First Home Buyers

How will this scheme be administered?

  • The ATO has the primary responsibility for administering the scheme. The ATO will be responsible for determining the eligibility of the person seeking a release and for calculating the release amounts based on information provided by the applicant and superannuation funds. The main responsibility of superannuation funds will be responding to a release request authorised by the ATO.
  • The ATO will also be responsible for administering compliance mechanisms to ensure that people purchase their first home after they withdraw from superannuation for their deposit.

Will a release from superannuation for housing that is taxed on withdrawal also trigger a reduction in social security entitlements?

  • No. While the concessional part of a release amount will be included in a person’s taxable income it will not flow through to other income tests used for other purposes, such as for calculation of HECS/HELP repayments, family tax benefit or child care benefit. This reflects that these withdrawals represent a return of capital.

Can non-concessional contributions (post-tax) be made under the scheme? 

  • Yes. Non-concessional contributions can also be made within the scheme. While these contributions will not benefit from a tax concession, earnings on these contributions will benefit from the concessional rate of tax in superannuation and the higher returns often realised inside superannuation. When non-concessional amounts are withdrawn, they will not be taxed.

 

Downsizers

Will sale proceeds contributed to superannuation under this measure count toward the Age Pension assets test? 

  • Yes. Any change in the person’s superannuation balance as a result of this measure will count towards the Age Pension assets test.

Will contributions made under this measure be exempt from the $1.6 million transfer balance cap? 

  • No. Only people who have remaining transfer balance cap space will be able to convert their contributions into a pension phase account where earnings are tax-free.

Will the $1.6 million balance threshold for making non-concessional contributions also apply to the special downsizing cap? 

  • No. Restrictions on non-concessional contributions for people with balances above $1.6 million will not apply to contributions made under this new special downsizing cap.
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