Can I access my super for my first home
“It’s a fantastic opportunity to start thinking about super in a different way.”
It’s hard for young Australians to get a foothold in the residential property market, but a plan announced in May 2017 could boost their chances.
As part of this year’s budget, announced on May 9, 2017, the federal government launched an important new program, the First Home Super Saver Scheme.
The initiative means the upcoming cohort of first home buyers will be able to use the tax benefits of the superannuation system to save a deposit for their first property purchase.
Importantly, it will allow participants to slash the time it takes to save for a deposit. At the same time, it will also help reduce the tax they pay.
From July 1, 2017, people qualifying for the First Home Super Saver Scheme will be able to take out voluntary contributions made to their super fund after this date to put towards a deposit for their first home.
Voluntary contributions include concessional and non-concessional personal contributions and salary sacrificed contributions to a super fund.
The scheme offers aspiring first home buyers who are saving their pennies for a deposit an alternative to accumulating a portion of their after-tax salary in a regular savings account.
Instead, prospective first-time property purchasers will be able to salary sacrifice and make additional voluntary contributions to their super fund.
People who take advantage of the scheme can contribute up to $15,000 in voluntary contributions to their super fund each financial year to go towards the amount that can be accessed through super for a deposit.
Through this initiative savers can access up to $30,000 in personal contributions made to their super fund, plus an associated deemed earnings amount, to go towards a deposit for a first property purchase.
Interest compounds every year at a rate of 4.78 per cent on money contributed to a super fund through this scheme.
Money added to a super account under the scheme will be taxed at the saver’s marginal tax rate, minus a 30 per cent offset. There’s no time limit for withdrawing the money.
It’s a fantastic opportunity to start thinking about super in a different way, and it helps young Australians get into the property market.
In fact, it could mean the difference between staying in the rental market and being able to afford a home.
How it works
The Australian Taxation Office has developed a hypothetical case study to demonstrate how this scheme works in practice. In its example, Michelle is working towards building up a deposit for a first home on a salary of $60,000 a year.
She salary sacrifices $10,000 of her before-tax earnings into her super fund. This adds $8,500 to her balance, after the contributions tax has been taken out.
If she does this for three years she will be able to draw on $27,380 as a deposit for her first property purchase. These funds will be taxed at her marginal rate plus the Medicare levy, minus the 30 per cent offset.
So she will have $25,760 she can use for her deposit, taking into account the $1,620 in tax payable on her contribution.
The ATO’s calculations show Michelle is about $6,240 better off than if she had used a standard savings account to save up these funds.
Legislation was being developed for the scheme at the time of writing. If the eventual legislation is passed by Parliament, savers will be able to take advantage of the scheme from the 2018 financial year.