First home buyer superannuation scheme to ‘boost savings by 30 per cent’, Scott Morrison says
FIRST home buyers will finally be able to dip into their superannuation to pay for a deposit under the federal government’s wide-ranging housing affordability package.
Renters, people waiting for subsidised housing and the homeless get a boost in the 2017 Budget, while property investors face tougher rules around negative gearing and capital gains tax and older Australians are being encouraged to downsize.
Under the widely anticipated superannuation scheme for first home buyers, existing super balances will remain locked away.
From July 1, savers will be able to salary sacrifice extra contributions into their superannuation account above the compulsory contribution, up to a maximum of $30,000 in total and $15,000 in a single year.
They will then be able to withdraw that cash from July 1, 2018 onwards, along with any associated earnings.
“Under this plan, most first home savers will be able accelerate their savings by at least 30 per cent,” Treasurer Scott Morrison said in his budget speech.
Some economists have previously questioned the wisdom of such a scheme, warning it may simply increase demand and push up house prices.
Dubbed the “First Home Super Savers Scheme”, it will attract the tax benefits of superannuation, with contributions and earnings taxed at 15 per cent, rather than marginal rates, and withdrawals taxed at 30 per cent below their marginal rate.
“Savers will not have to set up another account, they can just use their existing super account and decide how much of their income they want to put aside to save for their first home deposit,” Mr Morrison said.
For an idea of how it would work, the government gives the example of “Michelle”.
Michelle earns $60,000 a year, and salary sacrifices $10,000 of her pre-tax income into her superannuation account, boosting her balance by $8500 after contributions tax. After three years, she can withdraw $27,380 plus earnings on those contributions, paying tax of $1620, leaving her with $25,760 for her deposit. That works out to about $6240 more than if she had saved in a standard deposit account.
The scheme is expected to cost the budget bottom line $250 million over four years, while the Australian Taxation Office will be given an additional $9.4 million for its implementation.
frank.chung@news.com.au
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If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2017-18 Federal Budget, please feel free to give me a call on 0414 412 731 or email me at ian@mcdadvisory.com.au to arrange a time to meet so that we can discuss your particular requirements in more detail.
