From 1 July 2018 first home buyers can apply to use their additional super contributions to purchase their first home.
The Australian government first proposed the First Home Super Saver Scheme in the Federal Budget in May 2017 to help reduce the barriers preventing people from entering the property market. The proposal became law in December 2017.
The government expects that the scheme might help first home buyers build their savings for a home deposit faster by providing the concessional tax treatment within super. You can apply to release voluntary contributions to a maximum of $15,000 in a financial year and $30,000 in total across years.
To be eligible for the scheme you need to:
- have not owned a home before
- be 18 years old or over
- have not previously released First Home Super Saver funds
- intend to live in the property you are buying as soon as practicable
- intend to live in the property for at least six months of the first 12 months you own it (once it is practical to move in)
- not be buying a premises incapable of being occupied, a houseboat, a motor home or vacant land
How can you make contributions?
You can make additional concessional and non-concessional contributions up to your existing superannuation contribution caps. Concessional contributions will be taxed at 15%.
How do you release the money?
Once requested, the Commissioner of Taxation will issue a release authority to your super fund/s and the requested amount/s will be sent to the Australian Tax Office (ATO).
The ATO will withhold the appropriate amount of tax (your marginal tax rate less a 30% offset or 17% if the Commissioner is unable to estimate your expected marginal rate) and then send the balance to you.
The ATO says it will take approximately 12 business days to process your request. A payment summary will also be sent which will include the total amount of tax withheld. This amount needs to be included in your tax return for that financial year.
Once your money is released you have up to 12 months to sign a contract to purchase or construct a home.
What are the considerations?
First Home Super Saver funds may not be released from defined benefit interests or constitutionally protect funds, so check that you will be able to release the money. There may also be some fees, charges and insurance implications that occur when the money is released.
Things to consider: This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFS) is the issuer of interests in Commonwealth Essential Super ABN 56 601 925 435 (Essential Super) and is a wholly owned subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 (Bank). This document may include financial product advice but does not consider your individual objectives, financial circumstances or needs. You should read the Product Disclosure Statement (PDS) for Essential Super before making any decision regarding this product. Download the PDS or call us on 13 40 74 for a copy. The Bank and its subsidiaries do not guarantee the performance of Essential Super and an investment in this product is subject to risk, loss of income and capital invested. An investment in Essential Super is via a superannuation trust and is therefore not an investment in, deposit with or other liability of the Bank or its subsidiaries. Where we mention ‘we’, ‘us’ or ‘our’, we mean CFS.