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First home super saver measure overlooked

SMSF advisers must think outside the square when it comes to opportunities surrounding the First Home Super Saver Scheme (FHSSS) and remain vigilant for unexpected scenarios, according to DBA Lawyers.

DBA Lawyers director Daniel Butler said the sector had dismissed the FHSSS as a strategy that was unlikely to be popular or taken up by SMSFs.

However, Butler raised the opportunity for SMSF clients to include their children in the fund to assist them in saving for their first home in light of housing affordability issues.

“There’s no age limit for making non-concessional contributions (NCC),” he said at the firm’s SMSF Strategy Seminar in Sydney yesterday.

“It’s still possible, but a child could have NCCs at the full measure and particularly someone could be putting away for their first home purchase the $60,000, so that’s there for the child even though they’re under 18.”

He said while there was an overlooked opportunity here, advisers would still need to keep in mind what the super system and its rules could look like when that child eventually turned 18.

The FHSSS allows individuals to contribute a maximum of $30,000 per member – or $15,000 a year within existing caps – into super, which means an eligible couple can contribute up to $60,000 as deposit savings.

Butler highlighted while there may be compelling reasons for parents to share their SMSFs with their children to assist them in buying their first home, they must be cognisant of the risks involved if there is a breakdown in the relationship.

“It’s very hard to get someone out of a fund. You can’t just boot them out,” he said, adding it would be difficult to eject them from the fund even by members who own a majority of the fund.

“At times that takes years of legal effort. Often there’s no clear legal answer and we’re just huffing and bluffing and going off to court and just incurring costs to try and get them out.”

The DBA Lawyers SMSF deed includes express provisions to admit members on a conditional basis where the conditional member can be paid out if they have satisfied the relevant condition of release or rolled out to another super fund upon the occurrence of a specific event or upon a specific time.

Butler said suitable related documentation, including disclosures and trustee resolutions, should be prepared to document the member’s admission and any relevant special conditions.

“You’d also be well advised to have a binding financial agreement on top of that because of the vagaries of the family court if it was in a relationship,” he noted.

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