The federal government has successfully passed legislation that will allow first home buyers to access their tax-exempt voluntary superannuation contributions when saving for a deposit.
On Thursday (7 December), the federal parliament passed elements of the Turnbull government’s housing affordability plan, which was first announced in the budget.
This plan incorporates the First Home Super Saver Scheme (FHSS), which enables first home buyers (FHBs) to access their tax-exempt voluntary superannuation contributions from 1 July 2018, and the rate of deemed earnings (made from 1 July 2017).
The FHSS permits individuals to contribute up to $30,000 (but no more than $15,000 a year) to their superannuation account, with FHB couples eligible to contribute up to $60,000.
It is hoped that the move will “accelerate” deposit saving by up to 30 per cent.
Further, in an attempt to free up homes for younger, growing families, the legislation will provide an incentive for older Australians (65 and over) to downsize, by allowing them to contribute up to $300,000 from the sale proceeds of their current dwelling, to their superannuation.
Both members of a couple aged over 65 will be eligible to make a contribution; meaning a couple can contribute a combined sum of $600,000 to their super.
In order to be eligible, Australians over the age of 65 must have lived in the dwelling they intend to sell for at least 10 years, and can only make contributions after 1 July 2018.
Speaking after the key elements were passed, Treasurer Scott Morrison, stated: “The FHSSS provides a much-needed tax cut to young Australians saving for their first home. From 1 July 2018, first home buyers will be able to withdraw voluntary superannuation contributions they’ve made since 1 July 2017, along with a deemed rate of earnings, to help buy their home. This will give first home buyers a significant leg-up towards saving their deposit, helping them overcome a key barrier for getting into the housing market.
“The downsizing measure removes a financial obstacle from older Australians who are considering moving to homes that better suit their needs.”
He concluded: “The Turnbull government is continuing to deliver on its commitment to ensure all Australians have access to secure, stable and affordable housing.”
Both housing affordability and FHBs have been in the spotlight recently; according to a recent Bankwest report, Australian FHBs are now spending more time saving for deposits before purchasing a home.
The 2017 Bankwest First Time Buyers Report revealed that on average, FHB couples now spend 4.6 years saving for a 20 per cent house deposit of $111,080 on a median priced home; up from 4.4 years spent saving on a deposit of $103,907 in the previous year.