When you’re buying a home it can be frustrating to see money locked away in super – funds that could go towards a deposit. The good news is that your super can help when it comes to buying a first home.
buying a home
One of the golden rules of buying a home is to draw up a budget. Along with your deposit, you may also need to allow for a range of upfront costs such as stamp duty, lenders mortgage insurance (if your deposit is below 20%), conveyancing fees, insurance, loan application fees and moving costs.
Bear in mind, owning a home comes with ongoing expenses from loan repayments and insurance, to council rates and maintenance. You need to be sure your budget can comfortably handle these regular costs.
First home super saver
The First Home Super Saver scheme (FHSS) helps you to save money to fast-track your way to a first home. It provides the benefits of tax savings plus the potential for higher returns than you’ll earn on a savings account.
The FHSS works like this. If you're eligible, you can make voluntary contributions to your super account and when you’re ready to buy your first home, you can withdraw this amount plus earnings less tax.
You can make before-tax contributions to your super account, for example, through salary sacrifice. These contributions are taxed at 15%. There are mechanisms to contribute after-tax too. Then, when you’re ready to buy a home, the withdrawals are taxed at your personal tax rate less a 30% rebate. You can learn more about concessional and non-concessional contribution limits here.
This way, more of your money goes towards buying a home rather than being paid in tax.
Your savings in super can also generate higher returns that you’ll earn on a savings account, which helps you grow your deposit sooner.
There are limits to how much you can save with a FHSS. You can apply to have a maximum of $15,000 of your voluntary contributions from any one financial year to be released under the FHSS scheme, up to a total of $30,000 contributions across all years.
If you change your mind, the money remains in super until you reach preservation age. There are a number of important things you need to know before using the FHSS scheme. You can find out more about eligibility and the FHSS here.
Re-evaluating personal insurance
For most of us, buying a home means taking on a major debt – our home loan. That’s why it’s a good time to review your personal insurance and maybe consider other voluntary types of cover offered by Active Super including salary continuance, which protects your income if you can’t work due to illness or injury.