First home buyers & retirees: What tax savings can you benefit from in the Budget?

Check the tax savings for first home buyers & retirees in the budget


The federal budget for 2017-18 includes some significant tax savings for home buyers.

In particular, there are a couple of sizable allowances for property owners and for first home buyers and retirees. This is an attempt by the government to reduce pressure on housing affordability.

Here we take a look at the First Home Saver Scheme (FHSS) and the Downsizers Contribution into Super, which especially affects retirees.

First Home Saver Scheme

The FHSS scheme was designed to help first home buyers save money for their deposit inside their superannuation fund.

The benefit of this strategy is that super is taxed concessionally. These tax savings mean that home buyers can save at a faster rate than with savings outside of super.

Superannuation is currently taxed at 15 percent, compared with an individual’s tax rate, which could be as high as 47 percent (including Medicare).

The FHSS can therefore become a great vehicle to house your savings – but there are a few rules that you must adhere to, as follows:

  • You need to be a first home buyer over the age of 18 years;
  • You are required to live in the premises you are buying, or intend to move in as soon as practicable;
  • You must live in the property for at least six months, within the first twelve months;
  • You are limited to a maximum $15,000 of voluntary contributions in any one financial year, up to a maximum of $30,000 across all years; and
  • You can only release the funds once from your super account.

There are also a couple of traps to be aware of, which are sure to catch out a few unsuspecting first home buyers:

  • If you sign your contract of sale before your funds have been released from your super account, you could be hit with FHSS tax!
  • The approval process to release your savings from super will take 25 days. So, some forward thinking is definitely required!
Downsizers contribution into super

The second significant saving for home buyers involves the new downsizers contribution into super ruling from the ATO.

From the 1ˢᵗ of July 2018, retirees are able to make a “downsizers contribution” into their super: up to $300,000 each ($600,000 as a couple) from the sale proceeds of selling their home.

The contribution will not count towards your contributions cap and it will not affect your total super balance until this is re-calculated on the 30ᵗʰ June, at the end of the financial year.

You are eligible to make a downsizer contribution to super, if you meet the following criteria:

  • You are aged 65 years or older when you make the contribution (there is no maximum age limit);
  • The contribution is from the proceeds of selling your home, where the contract of sale exchanged on or after 1ˢᵗ July 2018;
  • The home being sold has been owned by you or your spouse for at least 10 years prior to the sale;
  • The property is located in Australia and does not include caravans, houseboats or mobile homes;
  • The sale proceeds are exempt or partially exempt from capital gains tax (CGT) using the main residence exemption rule;
  • You provide your super fund with the Downsizers Contribution Into Super form, before or at the time of making the contribution;
  • The contribution is made within 90 days of receiving the sale proceeds; and
  • You don’t make another contribution from the sale of a second property.

The above information is designed to help you understand the main ATO rulings for home buyers in the latest federal budget.

However, if you have any questions about buying a home or getting the right loan, feel free to speak to one of our helpful advisers.