MONEY MATTERS MONDAY 3RD SEPTEMBER 2018
Smart Opportunities With First Home Super
The First Home Super Saver Scheme continues to go unnoticed by many people who could benefit from it. Anyone young or old who has not owned any real estate of any kind in Australia before can use the scheme to save a first home deposit faster. The Scheme is open to older people as well as young adults.
The Scheme uses the tax concessions of the superannuation system to allow first home buyers to save larger amounts more quickly. Last financial year they could start making contributions. This year they can draw a home deposit amount out and purchase their first home.
Helping you save pre-tax dollars faster!
Until now people have saved a deposit for their first home from after tax earnings. Obviously that income has been taxed at their marginal rate, typically 34.5 per cent including Medicare Levy. The new Scheme allows people to save from pre-tax income with a tax of only 15 per cent applied.
To save from pre-tax pay people arrange with their employer for a salary sacrifice amount to be deducted from their pay to go into super each payday. This means there are people who could use some of their super to buy a home right now and don’t even realise it.
I met one last week. This person has not owned a home before and has been sacrificing part of her salary into super for several years. She could draw out her voluntary contributions since 1st July 2017 for a home deposit now. Others would be in the same position.
Other potential contributions and deductions
People can also make lump sum contributions to their super fund and claim a personal tax deduction for them. This may bring a healthy tax refund to boost their home deposit.
People who have been saving for their first home and already have a sum put aside could contribute that into super now and claim a tax deduction for it. They can then draw it out when ready to buy a home.
The maximum contribution is $15,000 per person per year, and $30,000 total over all years. Also these contributions, when added to employer super guarantee contributions, must not exceed $25,000 per year.
Many parents help their children with money towards their first home deposit. That money could also be paid into the young person’s super fund as a lump sum with a tax deduction claimed for it.
That amount less the 15 per cent entry tax can be withdrawn for the deposit at any time. When the person completes their tax return they will receive a refund of perhaps 34.5 per cent of the contribution, putting them 19.5 per cent ahead.
Consider your own personal circumstances
It is important to consider the first home buyer’s marginal tax rate and other issues before making definite plans. Financial advisers can help make the right decisions.
This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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