The Parliament has passed legislation introducing the First Home Super Saver Scheme and the new downsizing rules for older people.
The FHSSS allows for $15,000 a year (up to a total of $30,000) to be contributed to super as a concessional contribution and put aside for a first home deposit.
The law says first home buyers have to buy “residential premises”. This includes vacant land (if the land is to be built on) but not premises that are not capable of being occupied as a residence. Houseboats and motor homes are not allowed.
People using the scheme have 12 months after releasing the savings from the super fund to sign a contract to purchase a qualifying home. They can apply to the Australian Taxation Office for a 12-month extension beyond that.
People who do not buy a home in the period allowed must either recontribute the release amount into superannuation or pay tax equal to 20 per cent of the amount released. The effect of this tax would be to remove the benefit of the tax concession you received by using the scheme.
You must occupy the premises as soon as practicable. You are not disqualified from using the scheme if your partner is not a first home buyer.
For downsizers, from July 1 next year a person aged 65 or over will be able to make a non-concessional superannuation contribution of up to $300,000 from the proceeds of selling their home.
These contributions will be in addition to those currently permitted under existing caps, the age test, work test and $1.6 million total superannuation balance test.
The measure will apply to the sale of a principal residence owned for the 10 years or more.
Both members of a couple will be able to take advantage of this measure for the same home.
The Government is hoping to remove the barriers to downsizing for older people and facilitate more effective use of the housing stock by freeing up larger homes.
However, the proceeds will count towards their Centrelink and Department of Veterans’ Affairs income and assets test.
Consultant Rice Warner says that for most retirees the new measure will be unattractive.
“A couple owning a home and with other assets, including superannuation, of $350,000 would be eligible for a full age pension of $34,800 a year,” Rice Warner says.
“If they capitalise $600,000 and put it into superannuation they lose the whole pension.”