Should you use the new super measures when you buy/sell your home?

April 2018

New laws come into effect on July 1, 2018 allow first home buyers to use their super to help buy a home and downsizers to contribute proceeds from the sale of their home to super – But should you do it?

The 2018 Federal Budget included two measures designed to help younger Australians either use their super to buy a home and older Australians to use their home to boost their super. There are pros and cons at either end of the spectrum so let's explore whether you should consider it.

First Home Buyers: The pros and cons of using super to save for a first home

The First Home Super Saver Scheme (FHSS) enables first-home buyers to save for a deposit inside their superannuation account, attracting the tax incentives and some of the earnings benefits of superannuation.

How does it work?

Well, home savers can make voluntary concessional contributions, for example via salary sacrifice, or non-concessional contributions via voluntary after-tax contributions of up to $15,000 per year within the existing caps, up to a total of $30,000.

Taxpayers have been able to make contributions since 1 July 2017 (although the legislation did not pass Parliament until 7 December 2017), however withdrawals cannot be made until 1 July 2018.

Note: Mandated employer contributions cannot be withdrawn under this scheme, it is only additional voluntary contributions made from 1 July 2017 that can be withdrawn.

Taxpayers with a Self-Managed Superannuation Fund (SMSF), will need to ensure that the trust deed allows for withdrawals under the FHSS to be made. The SMSF must also identify these contributions and report these to the ATO.

When you are ready to buy a house, you can withdraw the contributions along with any deemed earnings (90-day Bank Accepted Bill rate with an uplift factor of 3%), to help fund a deposit on a first home.

The sting in the tail

To extract the money from super, home savers apply to the Commissioner of Taxation for a first home super saver determination. The Commissioner then determines the maximum amount that can be released from the fund. When the amount is released from super, it is taxed at your marginal tax rate less a 30% offset (non-concessional contributions are not taxed).

What are the pros?

The upside of the FHSS is the tax benefit. For example, if you earn $70,000 a year and make salary sacrifice contributions of $10,000 per year, after 3 years of saving, approximately $25,892 will be available for a deposit under the scheme - $6,210 more than if the saving had occurred in a standard deposit account (you can estimate the impact of the scheme on you using the estimator).

Another upside is that the scheme applies to individuals. So, if you are a couple, you both could utilise the scheme for a deposit on the same home - effectively increasing your cap to a maximum of $60,000.

If you don't end up entering into a contract to purchase or construct a home within 12 months of withdrawing the deposit from superannuation, you can recontribute the amount to super, or pay an additional tax to unwind the concessional tax treatment that applied on the release of the money.

Home savers also need to move into the property as soon as practicable and occupy it for at least 6 of the first 12 months that it is practicable to do so.

The home saver scheme can only be used once by you.

What are the cons?

The cons of this scheme are mostly administrative.

On the investment side of things, using the above example, $6,210 over three years is an upside but may not be a huge upside compared to other investment returns given the administrative requirements of the scheme. But, for many, it may be the best offer available.

Who can use the first home saver scheme?

To be eligible for the FHSS, you must:

  • Be 18 years of age or older (to make a withdrawal under the scheme – you can contribute before the age of 18);
  • Have never had held taxable Australian real property (this includes residential, investment, and commercial property assets)

Downsizers: The pros and cons of contributing proceeds from the sale of your home to super

From 1 July 2018, if you are over 65, have held your home for 10 years or more and are looking to sell, you might be able to contribute some of the proceeds of the sale of your home to superannuation.

Using this measure means that downsizers can contribute a lump sum of up to $300,000 per person to superannuation without being restricted by the existing work test requirements, non-concessional contribution caps or total superannuation balance rules.

What are the pros?

It's a way of building up superannuation quickly and taking advantage of superannuation's concessional tax rates. The $1.6 million transfer balance cap will continue to apply so pension interests cannot exceed this amount. And, the Age Pension means test will continue to apply.

A word of caution: Downsizers considering using this initiative should get advice to ensure that they are eligible to use this measure and the contribution does not adversely affect their overall financial position.

The downsizer initiative applies to the sale of any dwelling in Australia – other than a caravan, houseboat or mobile home – that has held continuously for at least 10 years. Over those 10 years, the dwelling had to have been the main residence for at least part of the time.

As long as downsizers qualify for at least a partial main residence exemption under the CGT rules (or would qualify for the exemption if a capital gain arose) they may be able to access the downsizer concession. This means that they do not actually need to have lived in the property for the full 10-year period.

The rules also take into account changes of ownership between two spouses over the 10-year period prior to the sale. This could assist in situations where a spouse who owned the property has died and their interest is inherited by their surviving spouse. The surviving spouse can count the ownership period of their deceased spouse in determining whether the 10-year ownership period test is satisfied. This rule could also assist in situations where assets have been transferred as a result of marriage or de facto relationship breakdown.

More information

Utilising your super to buy property can have consequences for your tax. Contact us on 02 9957 4033 to discuss your specific circumstances and goals. 


In general, the maximum downsizer contribution is $300,000 per contributor (so, $600,000 for a couple). The contribution needs to be made within 90 days after your home changes ownership (generally, the date of settlement) but you can apply to the Tax Commissioner to extend this period. And, the initiative only applies once – you cannot use it again for future properties.


If you have a SMSF, contributions made under this scheme need to be reported to the ATO. You should also check the trust deed rules around the acceptance of contributions for members over the age of 65.


The eligibility requirements include:

·   The contribution from the sale is made to a complying superannuation fund

·   The contribution is equal to or less than the capital proceeds from the disposal of a main residence

·   The member or their spouse had an eligible interest in the main residence before the sale

·   The member, their spouse, their former spouse, or trustee of the deceased estate held an interest in the house during the prior 10 years

·   No prior downsizer contribution has been made

Get Advice

Before you make the move to raid your super for a first home or sell your house to add to your super later in life, our recommendation is to get advice. While it's easy to see the appeal of both schemes, it's important to understand the broader implications for tax purposes. Call our team on 02 9957 4033 for more information.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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