The Government’s proposed scheme will give aspiring first home buyers the opportunity to sock away up to $30,000 in their super fund for a deposit. You can save up to $15,000 each year for a home, up to the maximum $30,000. That means, for example, you could save $6000 every year, for five years, and then take out that money for a home purchase.
If you’re part of a couple, you can each save up to $30,000 and pool your money – so you could have a deposit of $60,000i
Because it’s in superannuation, you pay just 15% tax on the money that goes in, instead of your normal income tax rate of up to 47%.
And when you take out that money, you also get a good deal, paying your marginal tax rates less a 30 per cent offset.
If you’re a first home buyer, this scheme could provide a useful way to save for that much-needed deposit. However, you should pay attention to the details, including:
- The funds need to come from extra savings, not compulsory super payments. The 9.5% your employer puts into super won’t count, so you need to have a household budget and allocate some of your income to saving.
- The scheme will be administered by the ATO, and can only be used for a property purchase. If you decide not to buy a property, that money will stay in your super until ‘preservation age’ – the time you’re allowed to access it. (The exception would be if you qualify for early release due to hardship, under the normal super rules).
If you’re interested in how much you could save by using the scheme, the Government has created a handy tool, available online at http://budget.gov.au/estimator/
Ultimately, saving for and buying your first home is a complex process. Talking to an expert early on will ensure you know all your options and have the smartest plan in place.
Downsizers can upsize their super
Another helpful Budget measure is the ability for over-65s to sell their house and add up to $300,000 of the proceeds to their super as a non-concessional contribution (in other words, a pre-tax contribution).
This is a win-win for both young and old. It will boost the number of larger homes on the market – the type that young families are looking for – as well as helping retirees boost their super nest-egg and unlock the equity in their home.
However, it will affect people differently, depending on their individual circumstances so it’s best to seek professional advice if you’re considering it.