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Saving for your first home? Thinking about downsizing? How super can lend a hand

If you’re planning on downsizing, or are at the opposite end of the spectrum and saving for your first home, you may be able to take advantage of the super concessions introduced as part of the housing initiatives in the 2017 Federal Budget.

For downsizers, super concessions will allow them to contribute proceeds from the sale of their home to super. For first home savers it means being able to withdraw voluntary contributions  made to their super along with any deemed earnings, to help fund a deposit for their very first home.

Super concessions for downsizers

The introduction of the government’s downsizer initiative means that as of 1 July 2018 Australians who are over 65 years of age and have held their home for more than 10 years may be able to contribute part of the proceeds of the sale to their superannuation.

How does it work?

Under the scheme, downsizers will be able to contribute up to $300 000 per person to their super without restriction by concessional or non-concessional contribution caps. This amount can only come directly from sale proceeds and must be made within the first 90 days after the home changes ownership.

The contribution won’t count towards your contributions caps or be affected by the total super balance test in the year you make it. It will, however, count towards your total super balance and transfer balance cap which is currently set at $1.6 million. This transfer balance cap applies when shifting super savings into retirement phase.

Am I eligible?

To be eligible you must be 65 years or older and looking to sell a dwelling in Australia (this excludes caravans, mobile homes and houseboats) that you/your spouse have held for 10 or more consecutive years. The dwelling must have been your main residence for at least part of this time.

What else do I need to know?

  • You can only take advantage of this initiative once.
  • If you sell your home and choose to make a downsizer contribution, you are not obliged to purchase another home.
  • If you are unable to make a contribution within 90 days of selling your home, you are able to apply to the Tax Commissioner to extend this period.
  • Downsizer contributions aren’t tax deductible and are considered when determining eligibility for the age pension.

For more info click here.

Save for your first home using super

The first home savers scheme was introduced in the 2017 Federal Budget to help Australians enter the housing market. Simply put, it allows for first home buyers to save for a deposit inside their super account.

As of 1 July 2018 individuals who made voluntary contributions to their super after 1 July 2017 will be able to withdraw these contributions to help them with their first home deposits.

What’s so great about this?

Saving for a deposit inside a super account attracts tax incentives and some of the earnings benefits of super. By take advantaging of this scheme, individuals could boost savings they plan on putting towards a deposit by at least 30% compared to saving through a standard deposit account.

How does it work?

First home savers are able to make voluntary concessional contributions (such as by way of 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 they are ready to buy a house, individuals can withdraw their contributions along with any deemed earnings to help fund a deposit. The Commissioner of Taxation will determine the exact amount they may extract, and when it is released, it will be taxed at your marginal tax rate less a 30% offset. To gauge how much you could save under this scheme, use this estimator.

Am I eligible?

To access the first home savers scheme you must be 18 years or older and can’t have ever held taxable real property in Australia. You must also move into the property as soon as is practicable, and occupy it for at least six months of the first year.

What else do I need to know?

If you withdraw your deposit from super and don’t end up entering into a contract to purchase a home within 12 months you are able to recontribute the amount to your super or pay additional tax to unwind the concessional tax treatment that applied on the release of the money.

For more information click here.