Consultation on the proposed First Home Super Saver scheme and the Contributing the Proceeds of Downsizing scheme closed in early August, with draft legislation only recently being tabled in Parliament. First Home Super Saver and Downsizing schemes.
Some adjustments have been made from the original sketched-out proposals offered with the Federal Budget last May.
The First Home Super Saver (FHSS) proposal would see eligible first home buyers able to contribute up to an extra $15,000 per year (to a total maximum of $30,000) into their superannuation that would then be released if used to buy a home. However the contributions still count towards the annual concessional and non-concessional caps, and are not in addition to those caps.
Eligibility is limited to those aged 18 and over who have not used the FHSS before and have never owned real property in Australia. If purchasing with another person who already has property, you would not be disqualified from using the FHSS.
However, there can only be one request for a release of the amounts held in superannuation. If you withdraw less than the total $30,000 plus earnings in an initial release you cannot later seek to withdraw further amounts.
The other proposed scheme would allow individuals aged 65 or over to make a non-concessional contribution to super of up to $300,000 from the proceeds of selling their home. It is proposed to start from July 1, 2018.
These contributions will not count towards the non-concessional contribution cap and the individual making the contribution will not need to meet the existing maximum age, work or $1.6m balance tests for contributing to super.
The home sold must have been owned by the individual for the past 10 or more years and have been the principal residence of the individual. Both members of a couple can contribute to super under this policy from the proceeds of the sale, so up to $600,000 could be freed for super under this scheme.
Eligibility is dependent on:
- the property sold must have been held by the person for at least 10 years and been their principal place of residence for that period
- the property must be in Australia and cannot be a houseboat, caravan or other mobile home
- the contribution must be made within 90 days of the disposal of the dwelling, or such longer time as allowed by the Commissioner
- the individual must choose to treat the contribution as a downsizer contribution, and notify their superannuation provider in the approved form of this choice at the time the contribution is made, and
- the individual cannot have had downsizer contributions in relation to an earlier disposal of the main residence.
Downsizer contributions are not tax deductible and can be made for an individual in relation to one sale of the main residence. Further, downsizer contributions cannot be made in the future in relation to the sale of another main residence.
Therefore if you sell your house at age 65 but only contribute say $200,000, if you later sell an eligible home you will not be able to contribute any of that to make up the amount not initially contributed. However, you can make multiple contributions (up to the cap amount) from the sale of the same residence.
Pension test still a consideration
One factor that may restrict the benefit of this proposal, and thus play on the minds of older Australians on whether to sell their homes, is that the contributions will still count towards total pension assets tests. This means that older Australians will be moving funds out of an exempt asset (their home) into a non-exempt asset.
Currently, you can have up to $350,000 in non-exempt assets and still be eligible for the full pension. If you sell the house and contribute up to $300,000 into your superannuation, then this will increase your non-exempt assets by $300,000, and this is likely to cause a reduction in your government pension payment.
First Home Super Saver and Downsizing schemes First Home Super Saver and Downsizing schemes First Home Super Saver and Downsizing schemes First Home Super Saver and Downsizing schemes