News & Information

Use your Superannuation to save for your first home

October 31, 2017

To state the obvious, buying your first home is one of the most difficult tasks for people to undertake. Now you can use your Superannuation to help you save for your first home purchase.

From July 1, 2018 the First Home Savers Scheme will finally help first-home buyers to save a meaningful deposit inside their Superannuation account. The tax incentives and some of the earnings benefits of the investment are significant.

For too long, first-home buyers have found it almost impossible to save enough to secure a mortgage over a home.

People saving for their first home can now;

  1. make voluntary contributions to their Superannuation arrangement from their pre-tax salary via salary sacrifice of $15,000 or
  2. Voluntary personal contributions from their savings of up to $15,000 per year.
  3. These contributions must not exceed the existing Caps on various types of Superannuation contributions. Total contributions cannot exceed $30,000 in any financial year.

When the time comes to buy a house, you can withdraw those funds along with any deemed earnings and growth to help you fund the deposit for your first home.

Think about where your home deposit savings are invested

Please note it is important to consider and understand how these funds are being invested given you could require access in the shorter term. Most peoples Superannuation is invested for the longer term. This could mean you are actually  invested into a larger proportion of growth assets which could put your savings at risk in the event of a market correction (A euphemism for a stock market crash)

You should consider segregating these savings into a lower risk investment given you may require these funds in three to five years.

Accessing your of home saver funds

To access your first home saver funds, you will need to apply to the Commissioner of Taxation for a first home saver super determination. The Commissioner then determines the amount to release from your Superannuation for your first home deposit. When the funds are released from your Superannuation arrangement, the funds are taxed at your marginal rate less a 30% offset. The following is an example of how this occurs…

Assumptions:

  • you earn a taxable income of $75,000 per annum and
  • save $15,000 per year, after 2 years

You will have approximately $25,430 available to put towards your deposit. This is approximately $5,725 more than you would have had saved had you put money from your take home salary into a bank. Click here to do your own estimate.

If you end up not entering a contract to purchase a home or construction has not started within 12 months of accessing the funds, then you can recontribute the funds back into Superannuation. Alternatively, you can pay the tax that would have been payable had you not salary sacrificed those contributions. This in effect “Unwinds” the concessional tax treatment that was applied to your savings inside Superannuation.

To access this benefit you;

  1. Be over the age of 18
  2. Must never have held in real property including residential, investment or commercial property assets
  3. move into the property and remain for at least 6 of the first 12 months of ownership
  4. Can only use this facility once.

Its important to note that although this scheme commenced on 01/07/2017 (With access to funds post 10/07/2018), legislation has not formally been passed as yet. It would be prudent hold off for a while to see the final outcome of the legislation before considering the use of this strategy.

Would you like guidance and advice on this opportunity?

LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you.

Would you like to discuss your personal position further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733. There is no cost or obligation for our initial conversation/meeting.

Written by Anthony Stedman of LifeTime Financial Group. A leading privately owned Melbourne based Financial Planning practice.