Financial Planning

The super scheme for first home buyers

You’re moving into your new home; corks are popping and there are smiles all around – classic advertising that for many seems unattainable.


Although many Australians may want to bash the banks over tighter home lending criteria, it’s the bank regulator, the Australian Prudential Regulatory Authority (APRA) that has set these requirements to address the risks in the mortgage market. Low deposits were increasing the risks carried by lenders.


A poll conducted by MoneySmart showed that 43% of Australians don’t save. Of the number who are saving, only 16% are doing it comfortably.


The reasons are varied, but for the most part, modern families are over-burdened with commitments and more pressing priorities. Meanwhile, home ownership slips further away.


But fear not!


In December 2017, the First Home Super Saver (FHSS) Scheme was legislated.


In a nutshell, the scheme allows you to save your first home deposit within your complying super fund; meaning that you can take advantage of the tax and savings benefits unique to superannuation.


If it seems too good to be true, it’s not – but it could be. You’ve heard the term, ‘conditions apply’? Well this is no exception.


Read the fine print: the FHSS scheme is strictly regulated – after all superannuation’s ultimate goal is to preserve your savings until retirement.


Further, not everyone is eligible. To qualify, you must not have owned property in Australia; have never previously requested an FHSS release; and promise – on pain of Tax Office strife – not to use FHSS money to purchase a non-occupiable property, motor home, houseboat or vacant land. And not all super funds will be permitted to participate in this scheme.


So, let’s see how the figures stack up.


Say you’re putting $500 per month into a savings account earning around 2% per annum interest. You’ve paid tax on that money, at your marginal rate, so already you’re behind. But the kicker is that you must pay tax on the 2% earnings as well.


Not floating your boat?


Taking care not to exceed your annual contributions cap, consider contributing the same monthly $500 to an FHSS Scheme. Post-tax contributions to super are subject to a flat 15% contributions tax – and no tax on the earnings. Those choosing to salary sacrifice their contributions can use pre-tax money.


To access these funds for a deposit, you must wait until after 30 June 2018 and apply to the Commissioner of Taxation. You can apply for the release of eligible FHSS contributions up to $15,000 over one financial year, to a total of $30,000 over all years. You then have 12 months from the release date to purchase your first home.


Accumulated savings not used for your deposit will remain in your super fund, contributing to your long-term retirement plan.


There may be tax implications so seek professional advice before making any decisions.


The FHSS scheme may not be for everyone as some people feel that tying their cash up in a super fund is too restrictive; they’d prefer to maintain access to their money. Since the scrapping of the home saver account scheme, savers looking for cash accessibility and flexibility can consider a regular savings plan or a term deposit.


It all comes down to what suits you and your lifestyle. Chat with your financial adviser and work out the best way to take your first step towards your first home… and that bottle of bubbly!

House sharing? Here’s a good tip

When you move in with a friend or partner, make sure the utility bills for services to the property are in joint names. There are two good reasons for this:


1. Having both names on these accounts will help to build each person’s credit rating;


2. If your friend/partner moves out, they are still responsible for paying their share of the expenses incurred during their stay.


In the case of a split, both parties should make sure the name/s on each account are updated immediately after the joint bill has been paid and bond refunded.

CGT Relief Analysed – Ten simple tips for understanding CGT relief!


Ten simple tips for understanding CGT relief!


1.    You must be affected by the Transfer Balance Cap (this means rolling back funds into accumulation) or have a TRIS not in retirement phase just before 1 July 2017.


2.    CGT relief applies on an asset by asset basis. You do not need to apply it to all of the SMSF’s eligible assets.


3.    You must have held the asset on 9 November 2016 and not sold it before 30 June 2017.


4.    CGT relief locks in the Capital Gains Tax treatment of unrealised capital gains on pension assets by resetting their cost base to market value.


5.    The CGT discount period restarts from the time the asset’s cost base is reset.


6.    All assets that were segregated pension assets (includes 100% pension funds) on 9 November 2016 will effectively be tax free at the time they stop being segregated pension assets.  (You will need an actuarial certificate for the time after this date if you are adopting the proportionate method.)


7.    All assets that were unsegregated pension assets will lock in their capital gains on 30 June 2017. You can defer gains (not losses) until the asset is sold.


8.    Unless specific assets are rolled back, CGT relief can potentially be applied to all of the funds’ assets, regardless of the actual amount rolled back.


9.    Funds that had unsegregated pension assets and moved into segregated pension assets (100% pension funds) between 9 November 2016 and 30 June 2017 will not get any CGT relief.


10.    Your choice is irrevocable and must be made when your 2016-17 SMSF annual return is due by completing the CGT schedule.


Consider the following when making your choice:


• Asset cost bases and market values               • Your fund’s ECPI and future ECPI

• When members will enter retirement phase    • Future and current capital losses

• Deferral of capital gains                                   • The future market value and sale of assets


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Get your $20,000 instant asset write-off


If you buy an asset before 1 July 2017 and it costs less than $20,000, you can immediately deduct the business portion in your 2017 tax return.


You are eligible to claim a deduction for the business portion of each asset (new or second hand) costing less than $20,000 if:

–        you have a turnover less than $10 million (this has increased from $2 million), and

–        the asset was first used or installed ready for use in the 2016-17 income year.


Assets that cost $20,000 or more can’t be immediately deducted. They will continue to be deducted over time using a small business asset pool. You write-off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.


In the Budget 2017, the government announced an extension of the $20,000 instant asset write-off threshold to 30 June 2018. This extension still needs to be passed in parliament – the threshold currently reduces to $1,000 from 1 July 2017.


To find out more please call R A Carroll Accounts on (02) 4735 7122 or