Are you sick and tired of paying your rent that makes your landlord rich and does nothing for your future?
Thinking of buying your first home but you don’t have the money for a home deposit yet?
We have good news for you!
The Australian government has announced the First Home Super Saver Scheme in the release of the 2018 Federal Budget. It is designed to help Australians like you to achieve your dream of having your own home sooner, rather than later.
What is First Home Super Save Scheme?
On 21 July 2017, Treasury released draft legislation to implement the 2017-18 Federal Budget superannuation measures which aims to improve housing affordability and included the First Home Super Saver Scheme (FHSSS).
The proposed First Home Super Saver Scheme (FHSSS) will allow future voluntary superannuation contributions to be made from 1 July 2017, to be withdrawn for a first home deposit (starting from 1 July 2018).
The proposed scheme provides for up to $15,000 per year (and $30,000 in total) to be contributed to superannuation, subject to the contribution caps. Contributions can be either concessional or non-concessional and must be made within the existing superannuation contribution caps. Concessional contributions are those that are made pre-tax, for example contributions made through salary sacrifice arrangements. Non-concessional contributions are after tax contributions.
What is the benefit?
The First Home Super Saver Scheme is designed to assist eligible individuals save for their first home in a more tax effective manner than when using a standard savings accounts.
How does it work?
From 1 July 2017, first home buyers can start making voluntary concessional and non-concessional contributions in order to save for a deposit. These contributions, which are taxed at 15 per cent, along with earnings that relate to these contributions, can be withdrawn for a deposit. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset and allowed from 1 July 2018.
Many employees will be able to take advantage of salary sacrifice arrangements to make pre-tax contributions.
Individuals who are self-employed or whose employers do not offer salary sacrifice can claim a tax deduction on personal contributions, meaning savings effectively come out of pre-tax income.
Voluntary contributions under this scheme must be made within existing superannuation caps. The total concessional contributions an individual can make, from both compulsory employer contributions and voluntary contributions, including those made under the scheme cannot exceed $25,000 in 2017-18.
The First Home Super Saver Scheme will be administered by the ATO, which will determine the amount of contributions that can be released and instruct superannuation funds to make these payments accordingly.
The Federal Government Budget website has a useful calculator that allows you to estimate your cash benefits from using the First Home Super Saver Scheme. Click here to access the estimator.
Example: Boosting John and Beth’s first home deposit
John and Beth want to purchase their first home together. Beth earns $75,000 a year and using salary sacrifice, she directs $12,000 of pre-tax income into her superannuation account. This will increase her balance by $10,200 after the contributions tax has been paid by her fund. After three years, she will have an estimated $25,816 available for a deposit. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30 per cent offset. Beth has saved around $5,870 more for a deposit than if she had saved in a standard deposit account.
John has the same income and also salary sacrifices $12,000 annually to superannuation over the same period. Together they have $51,632 that they can put towards a deposit. This is $11,740 more than if they had saved in a standard deposit account.
Please contact our office to seek advice from a qualified accountant prior to utilising the First Home Super Saver Scheme to ensure you qualify and that it is suitable to your personal circumstances.
The information and any advice provided in this article has been prepared without taking into account your personal objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things.