The First Home Super Saver Scheme
The Australian Government has come up with a super way to help first home buyers save for a deposit, with the announcement of the First Home Super Saver scheme in the 2017 Federal Budget.
Designed to help first home buyers to get on the ladder sooner, from 1 July 2017 the scheme will allow individuals to contribute $15,000 per year to their super, up to a total of $30,000, on top of the existing compulsory super contribution.
For many living at home or renting, this is good news as it allows them to boost their savings for a first home by at least 30 per cent compared with saving through a standard account. This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation.
The First Home Super Saver scheme will be welcome news to many Australians who feel saving for a deposit is the biggest hurdle to purchasing their first home.
According to CoreLogic’s latest Perceptions of Housing Affordability report, almost two-thirds of those living at home (62%) can’t afford to move out, while 21% of those aged 18 or over and living in the family home expect to remain with their parents until they are at least 30 years old.
However, despite their concerns with purchasing their first home, respondents of the survey displayed a lack of knowledge of options available to help them.
Combined with the stamp duty concessions available to first home buyers, the First Home Buyers Super scheme this could be the most ideal time to work towards purchasing your first home.
Contributions made to super through the First Home Super Saver scheme will be taxed at 15 per cent, along with deemed earnings. Withdrawals will be allowed from 1 July 2018 and will be taxed at marginal tax rates less a 30 per cent offset.
Many employees can also take advantage of salary sacrifice arrangements to make pre-tax contributions, however those who are self-employed or whose employers do not offer salary sacrifice, can claim a tax deduction on personal contributions, which means savings effectively come out of pre-tax income.
So, what does this mean for the average person wishing to take advantage of the scheme?
The Government gives the following example:
Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund.
After three years, she is able to withdraw $27,380 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30 per cent offset. After paying $1,620 of withdrawal tax she has $25,760 that she can use for her deposit.
Michelle has saved around $6,240 more for a deposit than if she had saved in a standard deposit account. Michelle’s partner Nick has the same income and also salary sacrifices $10,000 annually to superannuation over the same period. Together they have $51,520 that they can put towards a deposit, $12,480 more than if they had saved in a standard deposit account.
If the First Home Super Saver scheme sounds super to you, but you need someone to take you through it, contact us at Campbell Green and one of our property experts will be happy to help.
