First home buyers need to save to meet costs like the home loan deposit, lenders mortgage insurance, stamp duty and upfront mortgage fees.
The First Home Super Saver Scheme was introduced to alleviate the home affordability problem. It will allow first home buyers to opt into the ATO scheme and salary sacrifice up to $15,000 to Superannuation each year, and up to a total $30,000 over two years.
The employer contributes salary sacrifice amounts to super plus the usual 9.5% compulsory super guarantee. Voluntary concessional contributions are also available to the self-employed and employees where salary sacrifice is not offered by employers. Note that the maximum total concessional contribution limits of $25,000 pa continues to apply in all cases.
Starting 1 July 2018, first home buyers may access their superannuation and withdraw voluntary contributions made from 1 July 2017, and deemed earnings, to help them buy their first home. An individual may access contributions up to $30,000 plus deemed earnings.
Couples may each individually take advantage of this scheme to buy their first home. They are entitled to fund a total voluntary contribution of up to $30,000 per year and $60,000 in total. Concessional contributions, are capped at $25,000 and taxed at 15% in the fund.
Investment earnings that can be withdrawn will be calculated at a deemed rate of return, being the 90-day bank bill rate plus 3%. Eg if the 90-day bank bill rate is 1.74%, the deemed return rate will be 4.74%. Concessional contributions and earnings used to purchase a home will be included in the individual’s taxable income and taxed at the marginal tax rate less the 30% tax offset.
The ATO will administer the First Home Super Saver Scheme. The ATO will determine the amount that can be released and instruct the super funds to transfer the funds. The ATO will also ensure funds are used to buy a first home and are currently developing the framework to administer this aspect of the scheme.
For those who want to buy a home in the coming years, they should start salary sacrificing as soon as possible. The pre-tax contributions is limited is $25,000 so those who earn $120,000 would receive a minimum of $11,400 in super guarantee contributions a year. This means they will be limited to $13,600 per year of voluntary concessional contributions.
The scheme is said to accelerate buyer savings by a minimum of 30%. However, depending on the location, $30,000 may not be enough for a deposit to purchase a home. First home buyers will need to boost the amount with additional savings and should depositing these savings into a high-interest savings account or term deposit with a competitive interest rate.
Taxpayers will pay $250 million for the scheme over the next four years. The First Home Super Saver Scheme has yet to be finalised.
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