Budget boosts savings for first homebuyers
It’s not all bad news for first homebuyers…
On the 9th of May the Australian Government handed down the 2017/18 budget. It brought some big changes which affect first homebuyers.
Most first homebuyers are familiar with the First Home Owners’ Grant, a one-off payment of $15,000 when purchasing a new home. However, after the end of June 2017, the grant drops to $10,000.
While this might sound like a blow to all the first homebuyers struggling to break into the market, it’s not all bad news.
While the First Home Owners’ Grant will be lower than previously, the government has also introduced the First Home Super Saver Scheme.
Let’s take a look at the First Home Super Saver Scheme in more detail.
What the scheme hopes to achieve
The First Home Super Saver Scheme was created to help first homebuyers enter the property market by allowing them to grow their savings within their superannuation account and save by making pre-tax contributions.
How it works
First homebuyers can make voluntary contributions to their superannuation accounts up to the amount of $30,000, with a limit of $15,000 per year, per individual. The deposit can then be withdrawn and used as a deposit for a first home.
- Contributing funds into a superannuation account can boost savings by 30 per cent, compared to a normal savings account.
- If you’re self-employed you can claim a tax deduction on your voluntary contributions.
- Individuals can make pre-tax contributions through a salary sacrifice arrangement with their employer.
Who manages the scheme?
The First Home Super Saver Scheme is managed by the ATO. They will have the responsibility of evaluating your eligibility and releasing the funds for your deposit. The ATO will work closely with your superannuation account to determine how much money is released. They will also make certain that the funds are being used for the intended purpose.
Laura earns $50,000 per year and her husband Chris earns $50,000 per year. Both individuals annually contribute an extra $12,000 to their superannuation accounts. After just 3 years this couple can withdraw a total of $25,909 each for a deposit on their new home. A total deposit of $51,818.
Due to the pre-tax savings Laura and Chris will generate by contributing to their superannuation accounts, the couple will save approximately $6320 more than if they were depositing into a normal savings account.
If you’d like to learn more about the First Home Super Saver Scheme, you can access the estimator for yourself at www.budget.gov.au/estimator/ or give Finance Detective a call on (08) 9289 7777.