Will the new budget help first home buyers?
The Federal Government announced its budget, earlier this month, placing a strong focus on first home buyers.
The First Home Super Saver Scheme was introduced as part of the big housing affordability measure, where from 1 July 2018 individuals will be able to apply to withdraw voluntary contributions made to super after 1 July 2017 for a first home deposit.
Those who receive a salary from employers who permit salary sacrificing, will be able to make these pre-tax voluntary contributions through salary sacrifice, ensuring they pay a lower rate immediately.
While singles will be able to salary sacrifice up to $15,000 each year and $30,000 in total, couples will be allowed up to $30,000 per year and $60,000 in total. These contributions will be taxed at 15%.
For those who are self-employed or their employer doesn’t want to offer salary sacrificing, the scheme is still available. These first home buyers will be able to deposit their post-tax income and then reconcile these deposits during tax time, taking advantage of tax deductions for the contributions.
Anyone wanting to withdraw pre-tax voluntary contributions will be taxed at marginal rates, minus a 30 per cent offset, however, unless the contributions are identified as part of the scheme, the super funds will not be accessible. Post-tax contributions will not be taxed when you withdraw them.
Estimations by the government point to a 30% boost to the amount of deposit saved.
"This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation," was said in the announcement.
While the scheme is an initiative to help first home buyers break into a tough housing market, it may not always get them the full deposit amount, as capital cities typically require a larger deposit.
The First Home Super Saver Scheme will be in effect from July 1 2017 -providing it passes parliament- however, first home buyer will only be able to withdraw funds from July 1 2018.