Blink and you might have missed it, but the federal government recently made two tweaks to housing-related super provisions that could give some first home buyers and downsizers a serious leg up.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The changes, both contained within the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021, were passed earlier this month and will come into force on July 1.
Both changes adjust the rules for existing programs already in place for Australians looking to either use super as a way to grow a housing deposit, or those nearing retirement age who wanted to use proceeds from the sale of the family home to top up their super balance.
For those approaching retirement, the bill reduces the eligibility age at which someone can make a downsizer contributions into superannuation, from 65 to 60 years old.
The home being sold must have been owned for at least 10 years and be at least partially exempt from capital gains tax to qualify.
"This will allow more older Australians to consider downsizing to homes that better meet their needs, increasing the supply of larger homes for young families.
"From 1 July 2018 to the end of January 2022, 36,800 individuals have contributed $8.9 billion to their superannuation under this measure," a joint press release from treasurer Josh Frydenberg and housing minister Michael Sukkar read.
This will allow more older Australians to consider downsizing to homes that better meet their needs
- Treasurer Josh Frydenberg and housing minister Michael Sukkar
But financial planners aren't convinced the measure will lead to a large increase in downsizer sales.
Financial planner Scott Malcolm, of Money Mechanics, said that both changes were welcome but likely wouldn't make a huge difference to most people.
"They're just minor changes to a system that's already there, so it's good news for people who are trying to get more money into super because a lot of people have their home as their primary asset and are looking to retire," he said.
Mr Malcolm said that the downsizer changes would be the biggest boon for those who already have a second property they intend on retiring to.
"It could make sense for people if they are selling their primary residence and moving into their beach house or something like that," he said.
Financial planner Nick Lucey, director of Nest Advisory Group, said that for most 60-year-olds who were already planning their retirement the rules wouldn't make a huge difference, with people in that age bracket already able to make contributions from the sale of their home.
"[For a] 60 year old who might choose to downsize their 1.5 million home to a 1 million home... under the current rules, without using the downsizer contribution they can still make a contribution to super anyway. They'll just make it under the non-concessional contribution caps, which they can bring forward three years depending on their super balance, and they can contribute $300,000 from that sale anyway without using the downsizer contribution," he explained.
Neither Mr Malcolm nor Mr Lucey believed the changes would see many 60-year-olds bring forward their retirement plans.
Mr Malcolm also cautioned that many downsizers in the current hot property market might also find it difficult to release a lot of equity from the sale of the family home.
"A lot of my clients who have tried to use it have basically downsized but depending on the market you're in they are still paying about the same amount of money buying a new place," he said.
Changes don't address 'red tape'
For prospective first home buyers, the government's changes increase the maximum amount of voluntary contributions that could be released under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000.
"I might see anywhere between 10 to 20 clients a week, a lot of them are first home buyers, and from that experience I can probably estimate over the past three years to my knowledge maybe three or four first homebuyers have utilised the scheme," Mr Lucey, who is also a mortgage broker, said.
"There's a lot of red tape around it, there's a lot of uncertainty and its hard for first home buyers to get advice on it, and you need to make sure you get the advice and do things correctly otherwise if you don't lodge the paperwork with the ATO at the right time or sign your contract of sale at the right time you might not get that money back," he added.
Mr Malcolm said that many first home buyers were choosing to buy an apartment using the federal government's 5 per cent deposit scheme rather than spending time accumulating a large deposit via the FHSSS.
"That [$50,000] would be potentially two or three years at least of contributions ... Who knows where the property market is going to be in two or three years time?" he said.
Despite this, the increased contributions cap meant the scheme could work for some first-home buyers, particularly those on higher incomes, if they used it in conjunction with another saving strategy.
"They [first home buyers] really have to have a combination strategy in place. That could be additional savings outside of super, it could be accessing parent equity or getting assistance from family, or could be about starting with a smaller viewpoint [and targeting a cheaper property]," he said.