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Would you use super to save for a first home?

Superannuation  |  10/05/2017  |   4 min read

The Federal Government's 2017 Budget proposes that super fund members could make extra salary sacrifice contributions into their account to help save for their first home. The proposed limit for these contributions is $15,000 a year, with the total amount of savings in super limited to $30,000. 

For a couple, this could provide $60,000 in their super accounts to put towards buying their first home.

This announcement comes off the back of massive community debate about the merits of allowing younger people to access their super to gain entry to Australia’s inflated residential real estate market.

Let's look at it more closely.

1. The government proposes that people are able to access super contributions over and above the mandatory 9.5% paid by their employer from 1 July 2017 to help fund a first home purchase.

2. Eligible contributions will include salary sacrifice and/or other voluntary contributions paid into super.

3. Any additional contributions made prior to 1 July 2017 will not be included in the scheme and therefore unavailable for home purchases.

4. Eligible contributions of up to $15,000 per annum will be included in the overall annual concessional contributions cap of $25,000. In other words, for those members with high savings capacity, the home savers contributions are not additional to the maximum they could make previously.

5. Home savers will be allowed to withdraw up to $30,000 for their first home purchase, with withdrawals from concessional (employer) contributions taxed at their marginal tax rate less 30% and any non-concessional (voluntary) contribution components tax-free.

Note that, while the government proposes that additional super contributions from 1 July 2017 will be eligible for the scheme, it suggests the first withdrawals for home purchases will only be allowed from July 2018.

It is important to note that the final details are still to be ironed out. And while there is a proposal for the calculation of investment earnings paid out on contributions used for the home purchase, there are still some areas requiring clarification.

In his budget reply, Opposition Leader, Bill Shorten, said Labor would oppose the scheme's introduction.

 

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