Fast Track your First Home

By Tina Zawila

It’s the time of the year when many of us review our goals and for some buying their first home is on the list.  This particular goal will require patience, persistence and determination, to save for the deposit, find the right property, and navigate the home loan market to find the best deal for you.

In the May 2017 Federal Budget the Government announced the First Home Super Saver Scheme which came into effect from 1 July 2017.  This scheme allows taxpayers to make voluntary contributions to superannuation to save for your first home, and then apply to have the funds released (with earnings) from the fund when you are ready to buy (provided it is after 1 July 2018).

The benefits of this scheme, over the traditional means of saving for a deposit via a bank account, include:

• ·    The contributions can be made before tax (concessional contributions) via a salary sacrifice arrangement, or by claiming a tax deduction for the contributions in your tax return.  This has the potential to save tax (depending on your marginal tax rate), allowing you to put a little extra away.

•     Upon withdrawal, you will be entitled to the earnings on the contributions which will be calculated based on the 90 day Bank Bill rate plus 3 % (which is the ATO’s Shortfall Interest Charge and it is currently 4.72% for the March 2018 quarter).  This rate is likely to be higher than the interest rate on a traditional savings account from a financial institution.

Of course, there are terms and conditions associated with this scheme including that your first home saver contributions must be made within existing superannuation caps ($25,000 in 2017-18).  Which means you need to know how much is currently contributed to super for you by your employer including any existing additional contributions.

You will also pay tax upon withdrawal of the funds at your marginal rate, however, a 30% offset will be applied, which may mean that little, if any, tax is payable depending on your income level in the year of withdrawal.

This is general information; please contact the professional team at Sothertons Gladstone on 49721300 for advice tailored to your own personal circumstances.  We are here to help you achieve your goal of home ownership.