Saving for a first home is hard.
From 1 July 2018, the first home savers scheme will enable first-home buyers to save for a deposit inside their superannuation account, attracting the tax incentives and some of the earnings benefits of superannuation.
Home savers can make voluntary concessional contributions (for example by salary sacrificing) or non-concessional contributions (voluntary after tax contributions) of $15,000 a year within existing caps, up to a total of $30,000.
When you are ready to buy a house, you can withdraw those contributions along with any deemed earnings in order to help fund a deposit on your first home. To extract the money from super, home savers apply to the Commissioner of Taxation for a first home super saver determination. The Commissioner then determines the maximum amount that can be released from the super fund. When the amount is released from super, it is taxed at your marginal tax rate less a 30% offset.
For example, if you earn $70,000 a year and make salary sacrifice contributions of $10,000 per year, after 3 years of saving, approximately $25,892 will be available for a deposit under the First Home Super Saver Scheme – $6,210 more than if the saving had occurred in a standard deposit account (you can estimate the impact of the scheme on you using the estimator).
If you don’t end up entering into a contract to purchase or construct a home within 12 months of withdrawing the deposit from superannuation, you can recontribute the amount to super, or pay an additional tax to unwind the concessional tax treatment that applied on the release of the money.
To access the scheme, home savers must be 18 years of age or older, and cannot ever have held taxable Australian real property (this includes residential, investment, and commercial property assets). Home savers also need to move into the property as soon as practicable and occupy it for at least 6 of the first 12 months that it is practicable to do so.
As with the concession for downsizers, the first home saver scheme can only be used once by you.
While the capacity to voluntarily contribute to the first home savers scheme started on 1 July 2017 (with withdrawals available form 1 July 2018), it’s best to wait until the legislation is confirmed by Parliament just in case anything changes.