New Gov Scheme Boosts Savings For Vic Homebuyers

Buying Your First Home in Victoria

Property ownership continues to be a hot topic in Victoria, and with good reason – a home is often our greatest asset, and there’s no doubt that evolving western economies and demands of modernity have made it more difficult to attain than in previous generations.

That’s why there are a number of initiatives for those buying their first home in Victoria. Many of these can save you a considerable amount of money, so it’s important to be aware of them all.

The latest of these initiatives is the government’s First Home Super Saver (FHSS) scheme. This scheme allows home buyers to make voluntary concessional (before tax) contributions to their superannuation to bolster their saving efforts.

Saving with pre-tax contributions

A big benefit of the FHSS scheme is the ability to make pre-tax contributions to your superannuation that you can then withdraw when you’re ready to purchase a home. Because the contributions are before tax, you are able to save more money than if you put those funds into a savings account after tax.

There’s also a chance that the concessional contribution will take you to a lower tax bracket, saving you additional money on tax for that financial year.

Speak to one of our brokers to work out the details and discover just how much will be saved in your unique circumstance.

How to use the FHSS scheme

Now that you know what the First Home Super Saver scheme is, here’s what to do next:

• Speak to a broker to determine how much you need for a deposit to buy your dream home that fits your circumstances.
• Now that you know how much you need to save you can plan the amount you need to deposit into your super and/or outside of super savings keeping within the concessional caps of $25,000 per year. We can help you determine how much to contribute.
• Tell your HR department to contribute your chosen super savings amount into your super.
• Sit back and watch your savings grow while your pay automatically saves for you – out of sight, out of mind!
  
  

How Much to Contribute

• You are permitted to contribute up to the contribution cap for your super. For 2017/2018, the cap is $25,000 – this includes your employer’s contributions of 9.5% of your income.

How Much to Withdraw

• You are able to withdraw $15,000 if you contributed for one year, and up to $30,000 if you contributed over multiple years. If you are buying a home with a partner who is also participating in the FHSS scheme, you can both withdraw up to these amounts.
  This means a couple is able to use a total of $60,000 for their home purchase via the FHSS scheme.
• When you’re ready to buy a home, you will use a government form to withdraw the funds – you must spend the money to purchase your first property within 12 months of withdrawal.
• Funds that are not used for buying a home within 12 months of withdrawal will return back to your super and remain inaccessible until you are 65, so go shopping!

Note: there may be minor fees from your super fund. Check with your broker to determine the best course of action for your savings plan.

Who is eligible for the FHSS scheme?

The FHSS is a great way to boost your savings for that first home – but do you qualify? Here’s what to know:

• You can start making contributions before you turn 18, but you must be 18 years of age or older to withdraw funds.
• You must have never owned property in Australia, including investment and commercial property, land and a lease of land or company title interest in land within Australia.
• You must not have made a prior FHSS scheme release request.

The FHHS scheme could be a great boost to your savings – speak to our brokers to learn more about how it can fit into your property-buying plans.

Tax Brackets & Additional Savings

Salary sacrifice has the potential to create additional savings by shifting you to a lower tax bracket. The table below shows tax rates

FHSS vs. savings account

Saving in super as a salary sacrifice contribution means you will not pay income tax on the amount saved. You will save on income tax, instead paying the smaller 15% tax applied to super.

The result? Greater overall savings.

Compared to your money sitting in a savings account earning you 2% interest for a year, a before-tax contribution to your super will potentially provide you with greater additional funds. See the tables below for details.

Using the FHSS scheme, a $70k income could provide up to $3,556 in additional savings – without affecting living expenses. 

With the FHSS scheme, an income of $100k could provide up to $3,608 in additional savings – without affecting living expenses.

Maximise your use of the FHSS

When you’re planning to buy your first home, the FHSS is a fantastic scheme that will help you generate thousands of dollars in additional savings – especially if you approach it with a view to withdraw your full $30k after two years.

Everyone’s circumstances are different, so it’s crucial to work with an experienced mortgage broker who can help you plan the best way to use the FHSS and other initiatives.

Our brokers are dedicated to helping you achieve your goals – contact us today to discover how to maximise your savings while getting the best home loan rates possible.

* The information in this article and the illustrations are for general information only and you should not be taken as constituting professional advice from Melcorp Finance. Melcorp Finance are not financial advisors. You should consider seeking independent, legal, financial, taxation or other advice to check how this information relates to your unique circumstances. Melcorp finance is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this document.