It is now possible to make use of your superannuation to draw down for a deposit for a home:
So how does it work?
Starting from 1 July 2017 you can make a voluntary contribution to your superannuation fund of up to $15,000 per year and up to a total of $30,000 which you later draw down (less taxes and plus earnings) to make a deposit on your first home. Amounts can be withdrawn after 1 July 2018.
As an example:
Samantha earns $60,000 and wants to buy her first home. Using salary sacrifice through her work she annually directs $10,000 of before tax income to her superannuation fund. When the fund receives the $10,000 it will take out the tax on contributions (15%) of $1,500.
If she had have not made the voluntary contribution she would have paid tax on the $10,000 at 34.5% which is her marginal rate (32.5c for each $1 over $37,000) plus the Medicare levy of 2%. So she would have paid tax of $3450. So although she has put an extra $8,500 ($10,000 less the tax $1,500) into super her take home pay has only reduced by $6,550 or $125 per week.
She repeats this for another 2 years until she has reached the $30,000 maximum amount.
At the end of the 3 years she can withdraw from her super fund $25,500 of contributions plus what the Government allows as earnings on the money, currently the rate that is applied is 4.78%. So in this example it would be $27,380.
There is another withdrawal tax amount when she takes the money out of super, which is her marginal rate (including Medicare levy) less 30%. So 4.5% (32.5c for each $1 over $37,000 plus the Medicare levy of 2%). The tax payable $1,232 on withdrawal.
Samantha would end up with $26,148 for her deposit as opposed to saving the money and earning bank interest of 2% she would have approximately $20,043 to put towards the house purchase.
So she is $6,105 better off by using this strategy.
There is an online estimator that you can use for your own situation:
You can see that it is not the simplest process but it certainly might boost your savings for your first home.
You can also withdraw from super contributions that you have made but not claimed a tax deduction for. Or you are self employed and have made personal contributions to super.
This is general information only and not intended as advice. Please see a financial advisor for advice specific to your situation.
Michele Purvis is an advisor with over 30 years experience working in the accounting and financial services industry helping clients to define and create their wealth.