As COVID-19 rolled out across the globe, the Federal government responded by introducing various stimuli designed to keep Australians working and building homes.
The construction sector accounts for a substantial component of the workforce, so it makes sense to keep tradies in work by offering incentives for home buyers to build new homes. These incentives have taken various guises since John Howard first introduced them during his Prime Ministership.
Nowadays, superannuation’s enormous pool of citizen-owned money has proven to be a useful cash-neutral resource for government to tap into by using people’s own funds to unlock housing supply and mobility.
The recently expanded First Home Super Saver Scheme (FHSSS) enables participants to build a deposit of up to $50,000 plus earnings in the low tax environment only superannuation offers. Recent changes to the FHSSS has boosted the cap from $30,000.
First home buyers can deposit up to $15,000 per annum into a super fund with after-tax non-concessional contributions or via voluntary additional salary sacrifice contributions. These additional deposits can be regularly contributed or via one-off payments.
There are some useful tax savings to be had via the scheme. As Nick Bruining elegantly explained recently, “A couple buying a house together [earning less than $120,000 each p.a] can effectively combine their schemes and save $100,000 this way.”
Of source, the purpose of superannuation is to enable a comfortable retirement for seniors. The ‘super downsizer’ rules allow a one-off single contribution of up to $300,000 per person to be plopped into super from the sale proceeds of your primary residence.
To qualify, you need to be over 60 (as from 1st July 2022) and have lived in the home for at least ten years. The sale proceeds need to be deposited into super within 90 days of settlement and the contribution is not considered part of any of the other contribution caps that otherwise apply to superannuation funds.
In theory, if you and your partner are 60 and both utilise all of the various concessions that apply from 1st July, you could each deposit a non-concessional contribution of $330,000 into super using the ‘bring-forward’ rules. By adding the $300,000 downsizer contribution, a couple who sells their family home could, in a single day, contribute a combined $1,260,000 into their super fund.
It would not surprise to see superannuation continued to be used as a funding pool for home buyers as affordability constraints continue to challenge the dream of home ownership.
Please note the content as opinion only. This does not constitute financial or tax advice. Seek independent, professional advice from licensed financial advisors.
Predictions of how property markets are likely to behave into the future are always risky, especially if people rely on them. You’d want to be pretty certain the predictions will play out in the manner forecast or risk the livelihoods of those that make real estate decisions predicated on such … Read more
During the winter months, when market conditions can flatten out, vendors often choose to hold off on their selling plans until spring when both gardens and moods improve. In a balanced market, this can be a reasonable strategy; an attractive garden can add genuine value to a property and there … Read more