A HOME

You may have noticed recently the government funded ad discussing the possibility of using your super to purchase your first home. The aim of the policy is to make it easier for first home owners to enter the market.

Since July 1 2017, individuals have been able to make voluntary contributions (eg salary sacrifice and non-concessional contributions) of up to $15,000 per year and $50,000 in total, to their super account to purchase a first home. These limits apply to each individual so a couple can contribute up to $30,000 per year and $100,000 in total. Voluntary contributions under this scheme must be made within existing super caps.

Withdrawals of the contributed amounts along with the deemed earnings was allowed from July 1 2018. The amount of earnings that can be released will be calculated using a deemed rate of return based on the 90-day Bank Bill rate across loans with CBA or other banks in the past 12 months. plus three percentage points (currently this equates to 7.3%).

CBA home buying executive general manager Michael Baumann told The Australian newspaper the bank recognised that “some homeowners are facing challenges refinancing their loans”. Thousands of mortgage holders coming off low interest fixed rates in the coming months and the prospect of much higher rates due to the Reserve Bank’s substantial increase in the cash rate over the last 12 months, will be looking to refinance their home loans. The team at Bell Partners can assist borrowers to ensure they are able to pass the serviceability test and secure a loan.

Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSS contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.

The withdrawals of concessional contributions and associated earnings will be taxed at the individual’s marginal tax rate, less a 30 per cent tax offset. When non-concessional amounts are withdrawn, they will not be taxed, but we anticipate that the earnings will be taxed at the individual’s marginal tax rate, less a 30 per cent tax offset.

The First Home Super Saver Scheme will be administered by the Australian Tax Office (ATO), which will determine the amount of contributions that can be released and will instruct super funds to make these withdrawal payments. The ATO will also be responsible for compliance to ensure that people purchase their first home after they withdraw from super for their deposit.

The essence of the scheme is that we are able to get concessions for saving for our first home. No doubt, this is a good thing but, there are limitations and considerations.

The investment strategy for these savings should be different to the strategy for the rest of the funds in superannuation. This is definitely not a one-size-fitsall strategy for those saving for their first home but, in many cases, it is a another worthwhile strategy.