Give your home deposit a super boost

With property prices continuing to rise across the country, it’s becoming much harder for many Australians to take that first step onto the property ladder.

Even though interest rates are at historic lows, it is still increasingly difficult for young families or first home buyers, in particular, to save for a home deposit. Unfortunately, as property prices continue to increase, so does the amount you need for a deposit.

In early 2020, it was predicted that house prices would increase, then we were hit with COVID-19 in early March 2020. The market contracted for a very short period; however, it bounced back relatively quickly with no sign of slowing down.

Government schemes

Whilst government support schemes like JobKeeper and JobSeeker appeared to alleviate some of the financial pressure on families during 2020 and early on in 2021, it didn’t make it any easier for first home buyers.

Property prices continue to increase at an alarming rate and the majority of first home buyers are being priced out of the market. With metropolitan areas becoming more unaffordable, some are making the decision to buy a property further afield in the outskirts of major cities, or regional and rural areas.

To assist first home buyers to get into the property market, the Australian Government introduced the First Home Super Saver Scheme (FHSSS) in the 2017-2018 Federal Budget.

How the scheme works

The FHSS scheme allows first home buyers to use their super to accelerate their savings, which can then be released and used towards a home deposit. The key advantage of this scheme is you’ll be using the same tax-effective method to save for your deposit, that is used for your superannuation. Your income will be taxed at 15%, which for most people, is lower than your ordinary tax rate.

First home buyers can make voluntary personal super contributions of up to $15,000 per financial year, then withdraw these super contribution amounts (plus associated earnings/less tax) to assist with a deposit for a home.

Before making any additional contributions to your super, you will need to make salary sacrificing arrangements with your employer, as well as check whether your nominated super fund will release the funds when you need them.

If you’re eligible, the maximum amount that can be withdrawn is $30,000 for individuals and $60,000 for couples. From 1 July 2022, the government has proposed to increase the maximum withdrawal amount to $50,000 per person.i This has not yet been passed by law.

Who is eligible?

Certain criteria need to be met to be eligible for this scheme, which is outlined below:

  • You must purchase a home in Australia

  • You must be 18 years of age or older

  • You must not have previously owned a property (including an investment property), vacant block of land, etc in Australia. To find out more go to ATO eligibility.

How to withdraw your contributions

Once you have saved the necessary amount in super, you will need to apply to the Australian Tax Office (ATO) for a determination and a release. You can visit the ATO website to make an application.

Before this request to make an application of withdrawal, you will need to obtain a ‘determination from the ATO’ which you can do through your myGov account. This will determine how much you are able to withdraw under this scheme.

Getting a home loan

Even with property prices predicted to rise for the foreseeable future, having a savings goal is key when it comes to saving for a home deposit.

Using the government’s FHSSS is a great way to start and can help you achieve your savings goal sooner but by creating a savings budget, this will also help you understand exactly where your money is being spent and where you can curb your spending – do you really need to buy lunch every day?

If you’d like to find out how much you may need for a house deposit or how to begin saving, call us today and we can get you closer to owning your own home.

i https://www.ato.gov.au/General/New-legislation/In-detail/Super/First-Home-Super-Saver-Scheme—increasing-the-maximum-releasable-amount-to-$50,000-and-technical-amendments/

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