The Government introduced bills in Parliament last week to give effect to its home downsizing and first home super saver schemes. Both were announced in the May Budget and both have serious flaws that will limit their effectiveness.

Under the downsizing measure, a person aged 65 or over will be able to make a non-concessional super 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 rules and caps, including the $1.6 million transfer balance cap.

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.

Anyone who takes advantage of the downsizing scheme to build up their super needs to realise that the proceeds will count towards their Centrelink and Department of Veterans’ Affairs income and assets test.

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.

If they capitalise $600,000 and put it into superannuation they lose the whole pension.

Under the proposed First Home Super Saver Scheme, $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.

A person using the scheme would have 12 months after releasing the savings from the super fund to sign a contract to purchase a qualifying home.

If the saver does not buy a home in the period allowed they must either recontribute the release amount into superannuation or pay tax equal to 20 per cent of the amount released.

The $30,000 limit will not make all that much difference for a first home buyer in the Sydney or Melbourne market.