EFFECTIVE 1 JULY 2017 - Subject to legislation passing
Individuals will be able to make voluntary superannuation contributions in excess of super guarantee of up to $15,000 per year up to a total of $30,000 to purchase their first home. These voluntary contributions, which will be taxed at 15%, along with deemed earnings, can be withdrawn for a deposit on a person’s first home. Withdrawals will be taxed at marginal tax rates less a 30% tax offset and will be allowed from 1 July 2018.
First home savers will be able to salary sacrifice an amount from their pre-tax income directly into super. Individuals who are self-employed or whose employers do not offer salary sacrifice will be able to claim a tax deduction on personal contributions. However, any pre-tax contributions made under these rules must be within the concessional cap.
First home savers will also be able to make non-concessional (post-tax) contributions under this scheme. However, these contributions will not be taxed when they are withdrawn.
The amount of deemed earnings that can be released under these rules will be calculated based on the 90 day Bank Bill rate plus 3% - currently equivalent to a deemed rate of return of 4.77%. This is the actual amount of additional earnings that you will be able to release - so if you invest in a growth portfolio and make 10% earnings then you will be only permitted to release 4.77% of the earnings.
The Government has confirmed that the ATO will have the primary responsibility for administering the scheme, including:
- eligibility of the person seeking a release
- calculation of the release amount
- compliance mechanisms to ensure the released monies are used for the intended purpose.
The Government has also confirmed that while the concessional part of a release amount will be included in a person's taxable income, it will not flow through to other income tests used for other purposes, such as for calculation of HECS/HELP repayments, family tax benefit or child care benefit.
Contact us if you would like help with understanding if this strategy is right for you or if you need help with understanding how much deposit you need to purchase your first property.