As predicted in the lead-up to the Budget – housing affordability has been confirmed as one of the major components of this year’s Budget.

With Superannuation receiving so much attention in last year’s Budget – there was not much in terms of unexpected news this year. However, there was an important announcement for First Home Buyers:

The First Home Super Saver Scheme which was announced on Budget night will allow first home buyers to withdraw voluntary contributions they make to superannuation (along with associated earnings) to be used towards a deposit for a first home.

Voluntary contributions include:

• Undeducted (non-concessional) personal contributions
• Deducted (concessional) personal contributions
• Salary sacrifice contributions.

The maximum amount that can be contributed, and later withdrawn, is $15,000 per annum, with a maximum limit of $30,000. The scheme applies to contributions made from 1 July 2017 – and withdrawals can be made from 1 July 2018. Where concessional contributions and associated earnings are withdrawn, they will be taxed at the contributor’s marginal tax rate (minus a 30% tax offset). Both members of a couple can take advantage of this measure to buy their first home together and effectively double the overall benefit.

Remember, you have a concessional contribution cap of $25,000 per financial year so you need to ensure your total Employer contributions and voluntary concessional contributions do not exceed this amount or you will be taxed at the highest margin.

The news is better for younger Australians on the housing front. While the Treasurer says there are no ‘silver bullets’ to improve housing affordability, he unveiled a number of measures to help first home buyers and increase housing supply.

A first home saver who earns $60,000 a year and contributes $10,000 a year into the scheme for three years will be about $6000 better off than if they’d simply put their money into a bank deposit which is the typical first home buyer strategy.

The scheme is unlikely to have a noticeable impact on boosting home ownership rates, although will allow forced savings for individuals and couples who take advantage of the tax concessions in  a superannuation environment.

When the time comes to make one of the biggest purchases of your life, First Home Buyer’s will pay tax on their withdrawal amount at their marginal rate, less 30 percentage points. For a person on the 37 cent rate, they pay just 7 cents on the dollar.

All up, a person earning $100,000 a year who puts $10,000 a year into the scheme for three years would end up with $24,777 to put towards their home deposit, versus just $18,586 if they put their money in a bank deposit. They’d end up paying an average tax rate of 17 per cent, instead of 38 per cent.

It needs to be remembered though that the budget announcements are just proposals at this stage. They need to be passed by both houses of Parliament before they become law and can always have further changes made before they become effective.

For further information visit: https://www.ato.gov.au/General/New-legislation/In-detail/Super/First-home-super-saving-scheme/

If you would like to discuss your options further please contact myself on 0434 502 079 or our office on 9188 1547 for a further chat.

The information is general in nature and does not take into account your personal objectives, needs and financial circumstances. You should consider the appropriateness of the information, having regard to your personal objectives, needs and financial circumstances. This information is not to be construed as personal advice, and should not be relied upon as a substitute for professional advice.