Home sweet home
So you’ve decided to venture into the real estate market. You have a standard savings account and you’re planning to deposit a certain amount of your weekly salary into it. But is that the smartest way to save for a house deposit? Not anymore.
From 1st July 2018, you can use certain additional superannuation savings to help buy your first home. By saving your pre-tax income and taking advantage of the First Home Super Savers Scheme (FHSSS) tax arrangements around super, the government calculates that over a three-year period, a couple could save an extra $12,480 for a home than if they had put their savings into a regular bank account. That’s a boost of at least 30% in comparison.
So how does it work?
The scheme, which was first announced in the 2017 Federal Budget, is intended to help Australians increase their savings for their first home by allowing them to build a deposit inside superannuation. This is possible through the concessional tax treatment of superannuation and a rate of associated earnings that is significantly higher than that offered by a standard deposit account.
Know your limits
There are some restrictions you’ll need to know about before you begin. The government imposes different caps on contributions, depending on your age and contribution type. You can make up to $25,000 in both compulsory employer contributions and voluntary concessional contributions in a financial year, but if you go over this cap, additional tax applies.
You can apply to have a maximum of $15,000 of your voluntary contributions from any one financial year included in your eligible contributions to be released under the FHSS scheme, up to a total of $30,000 contributions across all years. You will also receive an amount of earnings that relate to those contributions.
Once you withdraw your savings, the clock is ticking…
First home buyers have 12 months to spend the withdrawn money on a property. After this deadline, the money must be returned to your super fund or you’ll face a 20% penalty tax.
How can the FHSSS benefit you?
To better understand the advantages of saving for a home deposit through superannuation, contact Robertson Scannell and arrange to speak with one of our licensed Financial Advisers. They will ensure you have all the information you need to make an informed decision.