While the $15k First Homebuyers Grant in Western Australia reduces to $10k this 30th June for newly constructed houses it is not all doom and gloom. First home buyers will be able to save for a home deposit faster by salary sacrificing into their super fund from July 1 this year.
On top of existing compulsory super contributions, individuals saving to buy for their home will be able to put a total of $30,000 into their super, or $15,000 maximum per year. Couples can put in a total of $60,000.
The voluntary super contributions will be concessional (before-tax) contributions, which means you will need to arrange with your employer to salary sacrifice super contributions, or claim the super contributions as a tax deduction in your income tax return.
The benefit to first home buyers comes from the low tax rules that apply when people salary sacrifice, with contributions and earnings taxed at 15 per cent rather than marginal rates. At the time you withdraw your savings, which can’t be any earlier than 1 July 2018, those savings will be taxed at your marginal tax rates less a 30% tax offset.
One of the biggest obstacles for first home buyers is getting the deposit together.
Lets look at a case study which is actual clients of mine who are looking to buy their first house together:
Natalie and Todd are both PAYG and have been in steady jobs for some time. Natalie earns $65,000 and Todd $75,000. They wish to purchase their first home together and are looking at buying a newly established home to take advantage of the first home buyers grant. They currently have $55,000 in savings and are looking at purchasing a house for $600,000. They will need a deposit of $120,000 to avoid lenders mortgage insurance plus stamp duty and costs which equate to approximately $25,000. Less their savings and first home buyers grant they will need to save a further $80,000 to make this goal possible.
If Natalie and Todd construct a budget, they can realistically achieve this goal after three years by utilising the salary sacrifice into Super for savings towards their first home in conjunction with other savings beyond the voluntary super contributions they are able to make.
|June 2018||June 2019||June 2020|
|Todd – savings into Super||$10,000||$10,000||$10,000|
|Natalie – savings into Super||$10,000||$10,000||$10,000|
|Todd – additional savings||$5000||$6000||$8000|
|Natalie – additional savings||$3000||$4000||$5000|
Please note, the $10,000 yearly contributions are pre-tax income into Natalie and Todd’s superannuation account, increasing their balance by $8,500 after the contributions tax has been paid by their fund. After three years, they can withdraw $51,520 of contributions and deemed earnings on those contributions. Their withdrawal is taxed at a marginal rate (including Medicare levy) less a 30 per cent offset. Natalie and Todd have saved around $12,480 more for a deposit than if their monies were pulled and had saved in a standard deposit account.