Super Savings for Home

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 First Home Super Saver (FHSS) scheme enables participants to build a deposit of up to $50,000 plus earnings in the low tax environment only superannuation offers.

First home buyers can deposit up to $15,000 every year 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 ‘money-man’ Nick Bruining elegantly explained, “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.”

Siblings or friends can combine their own eligible FHSS to buy the same property but they all must be over 18 years of age and not have owned property before. Surprisingly, this scheme is being under-utilised

Of course, 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 1^st 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 1^st 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.