So what is it,and should the First Home Super Saver Scheme be on your radar as a strategy to help you enter the housing market? In short,should you care about this initiative?
The First Home Super Saver Scheme exists to help ensure that entry into the housing market remains possible. So how does it work? The First Home Super Saver Scheme enables you to make extra contributions into your superannuation account,and then withdraw them,plus the earnings,for the purposes of a first home deposit. It's rational because you are likely to save on tax,and typically the earnings on savings in a super fund will be better than what you would generate with a bank deposit.
From July 1,2018,it is possible to apply to withdraw voluntary contributions made to super after July 1,2017,for a first home deposit.
Voluntary contributions includes both pre-tax (salary sacrifice) and after tax contributions. Your normal superannuation contributions made by your employer are not relevant here – they remain preserved until your retirement. The First Home Super Saver Scheme only applies to extra contributions that you make.
The primary benefit exists for pre-tax (concessional) contributions,so for the remainder of this article,I'm going to focus on these. For most people,these occur via salary sacrificing to super. That is,you arrange with your employer to have an amount taken out of your wage before tax is calculated,and that money is sent to your super fund,on top of the normal employer contribution that they would be making.
Now if you're self-employed,it's even easier,as it's probable that any contribution to super that you make will be concessional. If your taxable income is quite low,this may not be the case,so get some advice here if that's applicable.
Because the money you're sending to super comes out before tax,you'll find that the impact on your pay packet is less than you would expect. So for instance if you were on a wage of $70,000,and you salary sacrificed $500 to super,your take home pay would reduce by about $350,not the full $500 amount.