Last week the Government handed down the Federal Budget for the 2017-18 year. One of the key themes this year is housing affordability and a number of taxation and superannuation measures have been introduced in relation to this.


Individuals will be able to make voluntary contributions into their superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual’s existing contribution caps.

From 1 July 2018 onwards, the individual will be able to withdraw these contributions and their associated deemed earnings for a first home deposit. The withdrawals will be taxed at an individual’s marginal tax rate, less a 30% tax offset.

Under this new first home super saver scheme, both members of a couple can take advantage of this measure to buy their first home together. The scheme is intended to provide an incentive to enable first home buyers to build savings faster for a home deposit, by accessing the tax advantages of superannuation.

The example provided by the Government is as follows:

Michelle earns $60,000 a year, and salary sacrifices $10,000 of her pre-tax income into her superannuation account, boosting her balance by $8,500 after contributions tax. After three years, she can withdraw $27,380 plus earnings on those contributions, paying tax of $1,620, leaving her with $25,760 for her deposit. That works out to about $6,240 more than if she had saved in a standard deposit account.

This scheme will assist first homebuyers, especially where they have larger incomes but cost of living pressures and taxes on their salaries have made saving for a deposit very difficult. Enabling them to salary sacrifice part of their deposit through their superannuation fund provides a tax effective mechanism to save for and then fund a deposit. The salary sacrifice is taxed at 15% going into their fund and attracts a 30% tax offset on withdrawal so can significantly boost savings for many first home buyers.

LRBAs included in super balance and transfer balance cap

The use of limited recourse borrowing arrangements (LRBAs) will be included in a member’s total superannuation balance and transfer balance cap from 1 July 2017.

LRBAs can be used to circumvent contribution caps and effectively transfer growth in assets from the accumulation phase to the retirement phase that is not captured by the transfer balance cap. The outstanding balance of an LRBA will now be included in a member’s annual total superannuation balance and the repayment of the principal and interest of an LRBA from a member’s accumulation account will be a credit in the member’s transfer balance account.

This measure will cause some to rethink their plans leading up to the introduction of the transfer balance caps on 1 July 2017.

Super contributions from downsizing

A person aged 65 or over can make a non-concessional contribution into superannuation of up to $300,000 from the proceeds of selling their principal residence. They must have owned their principal residence for at least 10 years. This measure will apply from 1 July 2018 and is available to both members of a couple for the same home.

These contributions are in addition to existing rules and caps and are exempt from the age test, work test and the $1.6m total superannuation balance test for making non-concessional contributions.

Whilst this measure certainly makes inroads to reducing the tax burden on older Australians downsizing to free up larger homes to the next generation of homebuyers it only addresses the tax consequences of any income earned on the surplus funds generated from the sale of their home. Issues such as Stamp Duty on the purchase of the smaller home will also need to be resolved before this measure will have any real effect on many older homeowners.

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.