As COVID-19 rolled out across the globe, our Federal government responded by introducing various stimuli designed to keep Australians working and building homes. Building commencements spiked but the rapidly rising costs of materials and labour combined with fixed price building contracts has seen nearly 3,000 construction companies fail this year alone. That’s partly why there’s very little chance we will build the 1.2 million homes promised by the current government by 2029.
“nearly 3,000 construction companies fail”
The construction sector accounts for a substantial component of the workforce, so it made sense to keep tradies in work by offering incentives for home buyers to build new homes. Such 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 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. 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.
There are some useful tax savings to be had via the scheme. As Nick Bruining has 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.”
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 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.
There are also moves from the federal government to tweak the tax rules for superannuation funds to incentivise them to invest in the ‘build-to-rent’ sector.
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.
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