On budget night this year the government announce two new changes to super, both relating to housing. And we now have draft legislation for both.
The first is called the First Home Super Saver Scheme (or FHSSS – now that will be easy to remember). The FHSSS will apply to voluntary superannuation contributions of up to $15,000 per year and $30,000 in total made from 1 July 2017. These contributions, along with deemed earnings (at the rate of the Shortfall Interest Charge), can be withdrawn for a home deposit from 1 July 2018. Pre-tax contributions are taxed at 15%; withdrawals will be taxed at marginal tax rates less a 30%.
You can only get a FHSSS from your super fund if you are over 18, and have not owned real property in Australia before (you can get an FHSSS if you have not owned real property but your partner who you are buying a property with has owned real property before). Once you get the FHSSS payment you must buy a house in 12 months and live in it for 6 months in the first 12 months it is practical to live in it. If you don’t sign a contract within 12 months of getting the FHSSS payment you must recontribute the amount to super or pay a 20% tax on the amount.
But the interesting thing about this change is the process of getting this money out of super. You apply to the ATO and they check your eligibility, calculate what amount can be taken out as a FHSSS, get the super fund to send the ATO the amount, withhold the tax from it, and the ATO sends the remaining amount to the applicant. The ATO will then require the applicant to show they bought a house (or land on which to build a house) in 12 months from the day they received an amount (signed a contract) and they lived in it for 6 months of the first year the house is able to be lived in.
The second is the downsizer’s concession. From July 2018, people aged 65 and over will be able to make a non-concessional contribution into their superannuation of up to $300,000 from the proceeds of selling their home. Existing contribution caps and restrictions will not apply to this downsizer contribution at the time, but the $1.6 million transfer balance cap and Age Pension means test will continue to apply and it will count towards total superannuation balance tests in later years. The measure will apply to homes held for a minimum of ten years, and both members of a couple may take advantage of it.
The draft law states that:
- You don’t actually have to downsize. You could buy a bigger house or just move in with the kids and still put 2x$300k into super from the sale of the house.
- Both spouses can contribute even if the house is only in one name.
- You have 90 days from the sale to contribute to the fund.