One of Scott Morrisons key budget measures was The First Home Super Saver Scheme – that enables individuals from 1 July 2018 to apply to withdraw voluntary contributions made to super after 1 July 2017 for a first home deposit.
The First Home Super Saver Scheme
The First Home Super Saver Scheme is designed to assist first homer buyers save for a deposit in a tax effective way, without eroding superannuation guarantee contributions or diluting our universal superannuation system. It will allow entry-level buyers to divert their pre-tax income towards a special savings account and save funds for a deposit at a discounted tax rate by making additional contributions to their superannuation that are able to be withdrawn to be used as a home deposit.
Voluntary contributions include:
- Undeducted (non-concessional) personal contributions
- Deducted (concessional) personal contributions
- Salary sacrifice contributions.
Individuals may contribute up to $15,000 a year (which is included in their existing contribution cap), and up to $30,000 all-up over their lifetime. In a First Home Super Saver Scheme, tax is paid at 15 per cent on contributions. This means 85 per cent of the pre-tax contribution is put to work within the fund, earning a deemed rate of return equivalent to the 90-day bank bill rate plus 3 per cent.
The client is then allowed to withdraw a maximum of $30,000 in voluntary contributions, plus deemed earnings, to finance the purchase of their first home.
Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30 per cent offset.
For couples, both individuals can take advantage of the scheme.
What this means
This means that depending on the rate of earnings, $60,000 withdrawn between a couple would cover the stamp duty on a home priced at Sydney’s $1.15 million median house price.
The more favourable tax treatment of superannuation contributions provides an incentive for first-home buyers to save and get into the housing market – especially given only 2 to 3 per cent of workers in the Millennial generation currently salary sacrifice.
While the money is invested through a super fund, the scheme will be administered by the ATO – hopefully meaning that an additional administrative burden – and therefore additional cost – will not be placed on superannuation funds.
The scheme kicks on from July 2017 where contributions will be able to be made – and withdrawals allowed from July 2018.