First Home Super Saver Scheme
First published on June 16, 2017
The Government is introducing a new way to help eligible Australians boost their savings for a first home using their superannuation.
What are the changes?
- Individuals can make voluntary contributions to superannuation of up to $15,000 per year and $30,000 in total for the purpose of purchasing a new home.
- Contributions can be either concessional or non-concessional and must be made within the existing superannuation contribution caps.
- Eligible first home buyers will be able to withdraw their contributions, along with an assumed earnings amount as a deposit for their first home from 1 July 2018.
What is the benefit?
Due to the concessional nature of superannuation, 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 the scheme will work
From 1 July 2017, eligible individuals will be able to make voluntary concessional or non-concessional contributions to superannuation for the purpose of saving for their first home.
Individuals who are employed can often enter into a salary sacrifice agreement with their employers to make additional concessional contributions to super. Individuals who are self-employed or employees who don’t have access to salary sacrifice may be able to claim a tax deduction for personal contributions they make to superannuation themselves.
Voluntary contributions can be withdrawn anytime from 1 July 2018 and used to purchase a new home. To reflect the investment returns made on these contributions while in superannuation a deemed earnings amount can also be withdrawn.
The total amount withdrawn will be taxed at the individual’s marginal tax rate less a 30% tax offset.
Unlike concessional contributions, non-concessional contributions will not benefit from the tax concession on contribution and will not be taxed on withdrawal. However the earnings on any non-concessional contributions made will benefit from the concessional rate of tax while in superannuation.
Will a withdrawal impact social security entitlements?
When an individual makes an eligible withdrawal from their superannuation the amount will be included in their personal taxable income for the year.
However as this payment is a withdrawal of an original contribution, plus deemed earnings, it will not flow through and impact other income tested benefits such as family tax benefit or child care benefit.
Amanda is currently savings for her first home. She earns $65,000 per year and enters into a salary sacrifice agreement with her employer to redirect $10,000 of her before tax salary to superannuation.
After 15% contributions tax, her superannuation balance increases by $8,500 per year. After three years Amanda can withdraw her voluntary concessional contributions, plus the deemed earnings amount applied to her contributions based on 90 day Bank Bill rate plus 3.0%.
By using the First Home Super Saver Scheme, Amanda is better off by $5,281* compared to accumulating after savings outside of superannuation.
* Estimate based on 2017-18 personal tax and Medicare levy rates.Rate of return used is the current bank bill rate of 1.78% + 3.0% (4.78%).
To ensure you get the right advice for your situation call MyState Wealth Management on 1300 651 600 or visit mystate.com.au/wealth for more information.
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