USING YOUR SUPER FUND TO SAVE FOR YOUR FIRST HOME
For most first home buyers, the property market can seem like a tough nut to crack. But here we look at a new super scheme that makes it a whole lot easier to save for a deposit.
Heard of the First Home Super Saver (FHSS) scheme?
No? Fair enough, it hasn’t been around that long.
In fact, it was only introduced in last year’s federal budget to reduce pressure on housing affordability.
Basically, the scheme allows you to save money for a first home inside your superannuation fund, which in turn allows you to save faster due to the concessional tax treatment that super offers.
Under the scheme you can make voluntary before-tax contributions (including salary-sacrifice, taxed at 15%) and after-tax contributions into your super fund.
Then, from July 1 this year, you’ll be able apply to release your contributions, along with associated interest earnings, to help you purchase your first home.
Contributions and withdrawals
Before you begin, you’ll need to double check your super fund will release your savings under the FHSS scheme and find out about any fees or insurance issues that could arise.
You’ll be able to make a maximum of $15,000 in eligible FHSS contributions in any one financial year, and a total of $30,000 across all years.
Now, remember before-tax contributions are taxed at 15%, so you’d be able to withdraw up to $25,500 to use for a home deposit.
The good news? That amount will most likely have accrued interest over the years, which you can also withdraw.
The bad news? You must pay a marginal withdrawal tax (less a 30 per cent offset).
You win some, you lose some.
The government has this handy calculator that can help you calculate how long it will take for you to save for a house deposit under the scheme.
In this instance, let’s say you’re on an income of $70,000 per year.
If you make an annual salary sacrifice contribution of $6,000 into your FHSS, you’d only reduce your take home pay by $3,890.
After five years of saving, an estimated $26,994 will be available for a deposit under the scheme – about $6,992 more than if the saving had occurred in a standard deposit account.
Better yet, if you’re saving for your first home as a couple, that’s a tad under $54,000 for a deposit in just five years.
To qualify for the scheme you must:
– Have not previously owned property in Australia
– Have not previously released FHSS funds
– Intend to live in the premises you buy for at least six of the first 12 months you own it
– Be over 18-years-old when requesting the release of your funds
– Not claim your place of residence will be a houseboat, a motor home or vacant land.
Saving for your first house deposit can be tough. But by doing it through the FHSS scheme not only are you saving at a faster rate due to the concessional tax treatment that super offers, but you won’t be tempted to use the funds for a holiday, new car or general purchases – because you can’t.
So if you’d like to know more about the FHSS scheme, give us a call. We’d be happy to look at your individual circumstances to work out a savings plan that best suits you.
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