A win for first homebuyers, empty nesters
People hoping to buy their first home should soon have an extra incentive to get into the market, with the Senate passing laws to allow first home buyers to use their super fund to help build a deposit.
The Australian Government announced the measure in this year’s Budget, saying the First Home Super Saver Scheme would help people save a deposit faster.
Here’s how it works:
From 1 July 2017, individuals can make extra contributions of up to $15,000 each year to their LGIAsuper account, up to a maximum of $30,000.
From 1 July 2018 those contributions, together with interest, can be withdrawn by eligible first home buyers.
Although 15% contributions tax is payable on the amount paid in and the amount withdrawn is taxed at the person’s marginal tax rate, a 30% offset on the withdrawal means the scheme is highly tax-effective for most people.
In fact, the Government estimates the scheme can boost savings for a deposit by at least 30% compared with using a traditional savings account.
To find out how you could benefit, check out The Australian Tax Office estimator.
New downsizing rules
The other big winners from the Government’s housing affordability measures are empty nesters, who may be able to downsize their home and contribute the proceeds to super.
From 1 July 2018, people aged 65 and older can make a non-concessional contribution to their super of up to $300,000 ($600,000 for a couple) after selling their home.
This is in addition to any other contributions people are eligible to make.
Both the First Home Super Saver Scheme and the new downsizing rules are subject to final approval by the House of Representatives, which is expected in early 2018.
More detailed information and factsheets for both measures can be found at www.budget.gov.au