Saving for the first home
Most of us know a young adult or know of people who do. As a method of saving for the first home, there are few better ways than utilising the First Home Super Saver.
Prospective first homeowners can use their superannuation accounts to save for a deposit on their first home. The benefit is a supercharged deposit when that time comes to purchase the first home. This is especially true when couples get involved in the strategy.
Superannuation earnings and contributions, for a first homebuyer, are taxed at 15% (10% capital gains tax where an asset is held for more than 12 months) versus the marginal tax rate for income earned on a salary of $120,000 is 39% (Medicare Levy incl.)
First Home Super Saver Scheme:
The First Home Super Saver Scheme allows first home buyers to access their superannuation to purchase their first home. Concessional (pre-tax) contributions into superannuation can be increased by up to $15,000 p.a. and to a maximum of $30,000 over the life of the scheme. Couples can contribute more than $60,000 to their first home.
Outlined below:
For someone on a pre-tax salary of $120,000, the tax saving in year 1 is $3,300 and in year 2 is $3,300. Equating to an immediate return/benefit on the $15,000 contribution of 22%. Over two years, the benefit is $6,600 plus the earnings of the fund at the lower 15% tax rate.
The initial contribution and associated earnings can be withdrawn from the fund at purchase of the first principal residence.
At withdrawal of funds, you will be required to purchase a principal residence in the following twelve months – or be subject to a tax penalty.
Helpful links below:
