Voluntary super scheme for first home buyer savers in 2017 Budget

Voluntary super scheme for first home buyer savers in 2017 Budget
Voluntary super scheme for first home buyer savers in 2017 Budget

First home buyers will finally be able to top up their superannuation to save for a lower taxed deposit under the federal government’s wide-ranging housing affordability package.

Under the scheme for first home buyers, existing super balances will remain locked away.

But 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.

The SMSF Association Chief Executive Officer John Maroney says the Government initiative linking housing and superannuation offers superannuation funds, including the SMSF sector, an excellent opportunity to engage younger fund members in their superannuation.

The first home buyers’ proposal strikes the right balance between encouraging young people to save for a first home deposit in a concessional tax environment, but also protecting their retirement savings for the longer-term.”

Villawood Properties has applauded the First Home Super Saver Scheme, announced in last night’s Federal Budget.

Its executive director, Rory Costelloe, said the Budget’s housing affordability measures would be embraced by many who had been struggling to save a sufficient deposit in a market where prices continue to grow at unprecedented rate. 

"The Government's salary sacrifice option for first home buyers signals greater consideration for the wider market as it supports the first home buyers, without taking anything away from the wider market. 

“It's difficult for traditional young first home buyers to compete with the volume of new buyers, particularly given that Victoria had an immigration boost of 110,000 people last year. 

“The comparatively modest amount allowed for salary sacrifice will also mean there's not a sudden influx of purchasers on the market ready to buy, which would escalate already high demand even further,” Mr. Costelloe said. 

Costelloe added that giving new buyers access to funds through schemes such as the salary sacrifice option and revisions to First Home Buyers benefits were not enough to cool the housing market and that there is a real need slash current delays in getting land to market. 

“Victoria currently on has 21 days’ worth of supply of land on the market, in a competitive market its more like 90 days, the real answer to affordability is to increase supply - this means reduce planning red tape and third party appeal rights to allow developers to get sufficient supply to the market,” said Mr Costelloe.

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.

Siobhan Hayden, HashChing COO, said Any Federal initiatives that allows Australians to salary sacrifice a proportion of their pre-tax income towards a deposit "is a good initiative."

“However, Australia is not a single housing market, and therefore any single measure introduced by the Federal Budget to address this holistically will not be successful.

“Supply issues still prevail, which continues to elevate prices in highly sought after suburbs.

“Even those living in expensive suburbs are surprised by their own asset appreciation.

“Innovative lending products will need to be introduced by existing lender participants, whereby multiple applicants can borrow but are proportionately liable. 

“In the medium term, the Federal government should do a comprehensive review of the tax tabled on a new house build which is currently circa 40%,” she said.

First Home Buyers Federal Budget

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