If you’re trying to save for a first home deposit, you might be interested in a new scheme that taps into super’s tax breaks to give your deposit a healthy boost.
The new First Home Super Saver Scheme allows you to voluntarily contribute up to $30,000 to your super and withdraw this amount (plus earnings, less tax) to buy your first home. Voluntary contributions include before-tax contributions such as salary sacrifice, and after-tax contributions.
The good part is that because you’re saving through super, you pay less tax than saving outside super, which means you can build a bigger deposit more quickly. If you’re a couple, you can both use the scheme so you could double the amount you save.
Can I apply?
You can apply if you have never owned a property in Australia, are 18 or older when you withdraw your money and you have not previously received a First Home Super Saver payment. You may also be eligible even if you have previously owned property in Australia, if you have suffered financial hardship.
How much can I contribute and withdraw?
From 1 July 2017, you can make voluntary contributions to your super, up to a maximum of $15,000 in a financial year and a maximum of $30,000 in total, that you can put towards your deposit. From 1 July 2018 onward, when you are ready to buy your first home you can apply to withdraw up to $30,000 of your contributions, less any contributions tax that has been deducted, plus associated earnings. You can only receive one payment under the scheme.
The normal contribution limits apply. The before-tax contributions limit is $25,000 in a financial year, and this includes your employer’s compulsory contributions. So if you want to use the new scheme, make sure you check how much your employer is contributing.
You’ll need to use an Australian Taxation Office (ATO) form to apply to withdraw your contributions. Once the ATO releases your funds, you have up to 12 months to sign a contract to purchase or construct your home.
Are my contributions taxed going in and coming out?
Before-tax contributions such as salary sacrifice are taxed at 15% going into your super fund. After-tax contributions are not taxed by your fund. When you withdraw your contributions and associated earnings, you will pay tax at your marginal tax rate less a 30% rebate on the assessable component.
What else affects how much I receive?
You will receive associated earnings on your contributions which is a ‘deemed’ rate calculated by the ATO. As a guide, the deemed rate for the March 2018 quarter was 4.72%.
What kind of home can I buy?
You must buy ‘residential premises’ with your savings. This excludes, houseboats, motor homes, or any premises that can’t be occupied as a residence and vacant land unless it is to build your home. The premises must become your home—not an investment property—and you must occupy the premises for at least six months in the year after purchase (or construction).