Scraping together the deposit for your first home can be a daunting task, but a federal government scheme that enables you to save via your super account may help you get there a little sooner.
For millennial Australians not on a stratospheric salary or who don’t have a line of credit at the Bank of Mum and Dad, getting a foothold on the property ladder in recent years has seemed more like an impossible dream than a realistic ambition.
Saving the required deposit is typically a long-term undertaking. According to Bankwest research published last year, it takes an average first-time home buyer couple 3.6 years to amass the 20 per cent deposit needed just for a capital city apartment. It takes 4.9 years to save the deposit for a house.
First Home Super Saver Scheme (FHSS)
Introduced on 1 July 2017, the First Home Super Saver Scheme aims to improve housing affordability for first-time home buyers. If you’ve never owned property, it allows you to save up to $30,000 towards a deposit, inside your superannuation fund.
If you’re a couple, you can save $30,000 each, provided you both meet the eligibility criteria. If one of you has owned property previously, the other party may still be eligible to access the scheme.
Additional super contributions can be made up to the annual superannuation contribution cap, which is currently $25,000.
From 1 July 2018, individuals who’ve accessed the scheme can apply to withdraw their voluntary contributions, along with associated earnings, to put towards the purchase of a first home.
Tax effective saving
Saving via your super fund can help you hit your retirement goal faster, courtesy of the concessional tax treatment that super contributions receive.
If you make additional super contributions from your pre-tax income through what’s known as salary sacrificing, they’ll be taxed at 15 per cent, not at your marginal rate. Alternatively, you can contribute a lump sum from your after-tax income and claim a personal tax deduction.
It makes sense to check out the tax advantages before you begin making additional contributions. For low-income earners, the tax break may be negligible, but for those in middle-income brackets who pay a higher marginal tax rate, it can mean a few thousand extra dollars a year towards a deposit.
If you’re aiming to buy in a capital city or major regional town, you’ll still need more funds, but when you’re itching to get under your own roof, every extra dollar counts.
Buying your first home is a big deal. I understand this and can provide you with information about your borrowing options and how large a deposit you’ll need to make it happen.