The government has introduced two measures to reduce the level of pressure in the housing market.

These are aimed at first home buyers and individuals aged 65 or above respectively.

The first measure titled ‘First Home Super Saving Scheme’ (FHSSS) allows an individual to withdraw a maximum of $30,000 (plus an associated deemed earnings amount) from their voluntary superannuation contributions to fund the purchase of a property, provided they can give sufficient evidence that they are buying a home for the first time in Australia.

Up to $15,000 of voluntary contributions made in a financial year can count towards the amount that can be released. Please see below for an example of how this works.

Any amounts withdrawn under the FHSSS are to be included in the individual’s assessable income and subject to tax at marginal tax rates (less a 30% offset).

Prior & Co. Pty Ltd’s view is that the FHSSS seems unconvincing due to the withdrawal limit being substantially below the level of savings needed to purchase a home. In addition, the withdrawal will still be subjected to tax. This means that for most individuals who are earning a moderate level of income, they will not actually be able to receive the full $30,000 when they withdraw it from their superannuation fund.

The second measure titled a ‘Downsizing Contribution’ allows individuals aged 65 or older to be able to contribute up to $300,000 of proceeds from the sale of their main residence into a complying superannuation fund. However, the home sold must have been the main residence for the individual (or their spouse) for the past 10 years.

Under current legislation, members over 65 years of age are only able to contribute to superannuation if they pass the work test, and even then, the non-concessional contributions are limited to $100,000 per annum. The Downsizing contribution will therefore give members the ability to transfer up to $300,000 for each spouse into superannuation when previously they would have had to retain the funds in a non-super environment.

The ‘Downsizing Contribution’ may be a useful option for those who are retiring and are already seeking to move into a smaller home, given that they are essentially able to make a free contribution of up to $300,000 into their superannuation account when they sell their main residence.