New Superannuation Rules

New Superannuation Rules

New superannuation rules allow better strategies when buying and selling your home.

From July 1st this year first home buyers will be able to use their super to help save the required deposit - while recent changes to legislation will also allow sellers to contribute the proceeds of home sales to their superannuation with fewer restrictions.

The First Home Super Saver Scheme

With a name reminiscent of a comic book villain’s plan for World Domination, the First Home Super Saver Scheme enables first home buyers to make use of their super account to save for a deposit on a home loan by making voluntary contributions such as salary sacrificing or voluntary after-tax contributions and giving them the tax and earnings benefits of superannuation.

To be eligible you need to be over 18 years of age and never owned property before in Australia and the contributions you make need to be over the 9.5% contribution made by your employer.

The advantages of using the FHSS include substantial tax savings. If you do this via a salary sacrifice arrangement you will generally be about 15% better off than if you had taken the money as a wage and invested it elsewhere.

The FHSS currently allows contributions of up to of $15,000 a year within existing caps, up to a total of $30,000, however the scheme is applied to individuals, so that a couple could BOTH use the program, each gaining the benefits and increasing the cap to $60,000.

The scheme will apply to any super fund although if you have your own Self Managed Super Fund you must ensure the trust deed allows withdrawals under the FHSS. Your SMSF also needs to identify FHSS contributions and report them to the ATO.

Once you withdraw the funds you have 12 months to sign a contract to purchase or build your home. You are also required to take up residence in the property as soon as is feasible and must remain there for at least 6 months of that first year.

The FHSS is a one time only arrangement and cannot be used to save for additional properties.

The Downsizer Initiative

Recent legislative changes now offer those who are selling their homes and downsizing to move a portion of their proceeds into their superfund.

Rules that take effect from July 1st for Australians aged 65 or over allow for a contribution of a lump sum up $300,000 per person without the restrictions of existing work tests, non-concessional contribution caps or total super balance rules.

This allows rapidly increasing your superannuation while making the best use of your Super’s concessional tax rates.

Similar to the FHSS this scheme is applied to individuals - so couples working together have the ability to contribute a total of $600,000.

The home that is being sold needs to be your principal place for residence, occupied for at least 10 years.

The contribution is not considered a non-concessional contribution and can still be made if the individual has a total balance greater than $1.6 million.

The $1.6 million transfer balance cap will still apply however and means testing will continue to be applied.

If you decide to avail yourself of this initiative it is worth remembering that the scheme only applies once – you cannot use it again for the sale of a second home, nor are the contributions tax deductible. However, you may make multiple contributions from the one sale if you desire and contributions must be made within 90 days of receiving the proceeds from the sale, which in most cases would be the settlement date.

Speak to one of the talented tax advisors at Maxum to discuss the best ways to leverage your superannuation in the housing market.

Maxum is a leading financial consultancy practice with clients Australia wide. Whether you are seeking financial planning or tax advice, investing, expanding your business or facing a possible downsizing or worse, Maxum provides a comprehensive service to secure, protect and grow your wealth. Discover more about our services or contact us today for expert advice.

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