Can I use my superannuation to buy a house to live in?

This is question asked by many Australians time and time again.

We’re often told that superannuation is our money, so we should be able to use it how we please, shouldn’t we?

Housing affordability in 2019 makes it difficult to enter the property market. But with superannuation savings ever-increasing, surely this would be the most logical way to get a foot in the door.

However, despite superannuation being your money, there are certain rules around accessing your super, which may prevent you from using your superannuation to buy a house to live in.
 

Can I Use My Superannuation To Buy A House To Live In?

 
You may be able to use your superannuation to buy a house to live, but certain conditions must be met first.

Generally, in order to use you super to buy a house, you must meet a full superannuation condition of release.

The most common conditions of release are ‘retirement‘ or reaching age 65.

Retirement is defined as retiring after reaching your preservation age with no intention of returning to work, or having an employment condition come to an end after age 60.

If you have met the definition of retirement or attained age 65, you will have full unrestricted access to your superannuation savings.

However, in order to use these superannuation saving to buy a house to live in, you would first need to withdrawal from super the amount you require to buy the house and direct the withdrawal to your personal bank account.

This amount could then be used towards the purchase of a house to live in.

Just make sure you understand any potential tax implications of making a withdrawal from super.

In no circumstance are you able to buy a house to live in while the money is still within your super account.
 

Can I Use a SMSF To Buy A House To Live In?

 
You may have heard about people using their superannuation to buy a house or other property within a self managed superannuation fund (SMSF).

While this is possible in some circumstances, it must be for investment purposes only under an arm’s-length arrangement.

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A house or property owned within the superannuation environment cannot be used for your own personal lifestyle needs.

In short (and in general), if you have not yet reached your superannuation preservation age, you cannot use your superannuation to buy a house to live in.

If you have reached your superannuation preservation age, you may be able to use your superannuation to buy a house to live in, but you will need to withdraw it from your super account first and understand any tax consequences of doing so.
 

Can I Use My Super For A House Deposit?

 
As mentioned above, if you have met a superannuation condition of release and able to access some or all of your retirement savings from super, then you can withdraw what you need to cover the cost of a house deposit.

However, the amount must first be removed from your super account into your personal bank account, then be used for a house deposit.

Read more, below, about the First Home Super Saver scheme.
 

Can I Use My Super To Buy An Investment Property?

 
Standard retail, corporate and industry superannuation accounts have unique ‘investment menus’ specific to the super fund.

The investment menu is generally made up of managed funds, multi-mix investment options, and maybe even access to ASX-listed shares.

These types of superannuation accounts do not provide sufficient scope for you to use your super to buy an investment property.

You can, however, use your super to buy an investment property if you have a self managed superannuation fund (SMSF) or were to rollover your existing super savings to a SMSF.

A SMSF is a structure whereby you are not only a member of the super fund, but also the trustee of the super fund.

It is important to note that running a SMSF comes with a high degree of responsibility, as you are legally required to to meet all legislative, regulatory, accounting and administrative obligations associated with being a trustee of a SMSF.

They costs associated with a SMSF can also be much higher than an ordinary superannuation account.

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In saying this, many SMSF trustees will engage the services of professional accountants and/or financial advisers to assist with maintaining a SMSF in a compliant manner.

An investment property owned within a SMSF must be owned for the benefit of members and consistent with the SMSF Investment Strategy.

Transactions must be done at arm’s-length and the investment property cannot be used for personal purposes (e.g. intermittently used as a holiday home).

All rent received from an investment property owned within a SMSF must be paid into the SMSF’s bank account and all expenses relating to the investment property must come from the SMSF’s bank account.
 

Can I Use My Super To Buy My First Home?

 
Again, you are unable to purchase a home within your super to live in and you can only use your superannuation to buy your first home if you have met a superannuation condition of release – by withdrawing your savings from super and purchasing your first home in your own name.

So, generally, no, you cannot use your super to buy your first home.

However, the FHSS scheme can help you save a deposit for your first home.
 

First Home Super Saver Scheme

 
The First Home Super Saver Scheme (FHSS), designed to improve housing affordability, is a way that you can save money for your first home within your superannuation account.

This is done by making voluntary concessional (pre-tax) or non-concessional (post-tax) contributions into super to save for your first home.

Some examples of voluntary super contributions include salary sacrifice contributions, personal concessional contributions (e.g. self-employed) or simply making personal non-concessional contributions from your bank account.

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You can then apply to access these voluntary contributions, plus an earnings, to help you purchase your first home.

The amount that you can access is limited to $15,000 of voluntary contributions from any one year and $30,000 across all years, plus earnings.

The FHSS release can only be applied for once. You must also live in the home you are buying as soon as practicable and stay in there for at least six of the initial 12 months that it is owned by you.

Further, you cannot have previously owned a property in Australia (including an investment property, land, etc.)

It is important to note that you must be 18 years of age to request a release of voluntary contributions under the FHSS scheme.
 

Benefit of the FHSS Scheme

 
The advantages of the First Home Super Saver scheme is that all earnings on your voluntary super contributions are taxed at a maximum of 15%, which can be lower than your individual tax rate.

Additionally, for voluntary concessional contributions, such as salary sacrifice or personal concessional contributions, the amount contributed is effectively made with pre-tax dollars, meaning that no income tax is paid on the amount contributed to super.

This potentially allows you to reach your first home deposit sooner.

Keep in mind that all concessional contributions to super do get taxed at a rate of 15% (yet effectively lower for low-income earners and higher for high income earners).

The disadvantages of the FHSS scheme is that the voluntary contributions must be used for the purchase of your first home, or remain in super for eventual retirement.

Therefore, if you decide to change your mind and not purchase a first home, you will be unable to access these voluntary contributions until you meet a different superannuation condition of release, such as retirement after your preservation age, or reaching age 65.

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Chris Strano

Chris Strano is a specialist independent superannuation author for SuperGuy.com.au - one of Australia's leading superannuation information resources.

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