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First Home Super Saver measure - now enacted
This measure will permit individuals who make voluntary superannuation contributions to withdraw those contributions (and associated earnings) from the superannuation fund for the purpose of purchasing or building their first home. Such withdrawals will be known as first home saver withdrawals.
Only voluntary superannuation contributions made since 1 July 2017 and associated earnings on those contributions can be withdrawn. Voluntary contributions could be before tax contributions (called concessional contributions) or after tax contributions (called non-concessional contributions). However, only voluntary contributions which are within the relevant contributions cap will be eligible for withdraw. This means that contributions which qualify as structured settlement contributions and small business CGT contributions are not treated as “voluntary contributions” for this purpose. Also, concessional or non-concessional which are excess contributions are also not “voluntary contributions” for this purpose.
Certain contributions cannot be eligible for “first home saver withdrawals”. The ineligible contributions are superannuation contributions which are made pursuant to an industrial award or agreement or contributions made by an employer in order to satisfy their “Superannuation guarantee” obligations. Government superannuation contributions are also excluded.
The maximum amount of an eligible voluntary contribution which can be withdrawn will be 85% of any concessional contribution and 100% of any non-concessional contributions.
The maximum amount of eligible voluntary contributions which can qualify for withdrawal is $30,000 per individual. This $30,000 figure must be built up over 2 or more years (not necessarily consecutive years) as no more than $15,000 of eligible voluntary contributions will be counted in any one financial year.
In order for an individual to have a first home saver withdrawal, they must first apply to the ATO. If their application is successful (that is they are eligible for a first home saver withdrawal) the ATO will issue a release authority to the individual. This authority will specify the total amount to be released (including associated earnings), the components of the amount to be released (that is the amount which consists of non-concessional contributions, concessional contributions). The individual must then provide the release authority to the superannuation fund trustee. The trustee will pay the required amount to the individual.
The taxable portion of the released amount is included in the individual’s taxable income and taxed at the individual’s marginal tax rate. The taxable portion is the sum of the concessional contributions and associated earnings of the released amount. However, no tax is payable on the portion of the released amount which consists of non-concessional contributions. The individual will be entitled to a 30% tax rebate in respect of the taxable portion.
If the released amount is not used or not entirely used in the acquisition of the first home (or used to build the first home), then the individual can return the amount or unused portion of the amount to the superannuation system. The returned amount is treated as a non-concessional contribution (that is, no tax deduction will be permitted for the returned payment).
If the released amount or the unused portion of the released amount is not returned to the superannuation system, the taxable portion of the released amount or the unused portion of the released amount will be subject to additional tax at 20%. This tax is imposed on the individual.
Applications for the withdrawal of voluntary contributions can only be made on or after 1 July 2018 with the individual being aged 18 years or more at the time the application is made.