Hi guys,
I realised that first home super saver scheme is actually very tax effective.
I'm currently saving up for a house right now and wondering if it's worth it and if someone could help me understand how this all works?
Details about me. I'm on 150k, possibly going to 160k this FY. I have current saved around 160k and able to save another 45k this FY.
Much appreciated in advance thanks!
oh so THAT'S what they meant by "first" when they said "first home super save scheme"
You make a good point, it seems the offer as it is currently worded is targeted at people who have never participated in the property market.
Obviously you might end up in the situation where people who own investment properties (but don't live in them and are still renting) wouldn't be getting a concession to buy their own home. This would be unfair, of course, and exactly the sort of problems the scheme should be addressing.
@CrowReally: In our case we had an investment home 15-20 years ago. We are now ineligible for any 'first home' buyers grants, schemes, whatever. Not crying about it, I just don't understand the logic. If it were means or asset based as per the example you gave that would make more sense to me.
@EightImmortals: What you need to do is fill out a Notice of Sentimental Intent (Housing) and tick the box that says "Oh sure, we owned a house, lock, stock and barrel. And we lived there, for many summers. But… I don't know… Without Pa there, it.. it never really felt like a home"
@EightImmortals: Here’s the logic. If you can afford an investment home, you can afford your first home.
I think that might be just you.
If you've purchased property that automatically makes you ineligible.
I think it’s BS that both people in a couple are ruled out if only one has had an interest in property.
I'm not well read up on the FHSSS but this sounds pretty unfortunate - where did you hear this?
@CrowReally: Sorry, I’m wrong. This seems to be on a per person basis eligibility.
Everything else First Home Buyer is couple based eg grants, stamp duty concession etc.
You need to make voluntary super contributions up to $15k per year.
In your case, because you earn $160k per year, just figure out how much your employer is contributing to your super. Then calculate difference between contribution cap which is currently $27,500 and what your employer contributes.
For you, that will be around $9k. Use your savings and put that difference into your super as voluntary super contribution every June (before end of financial year).
This is tax-deductible expense so you get 37% (your top marginal rate) of that amount back as tax refund a few weeks later.
Now do that every year in June until you voluntarily contribute $50k.
When you purchase your first home, you can withdraw from your super $50k + compounded earnings set by ATO.
There are some taxes I didn't mention such as voluntary super contribution taxed at 15% by your super and also withdrawal from super is subject to income tax but on that amount you pay your top marginal tax rate minus 30%.
In my view, it's all too complicated. But you are right - you will pay less tax in the end.
Nice work on the figures.
…you will pay less tax in the end.
The additional thing to consider is, because of OP's higher income and the relatively small difference between his compulsory SG amount and the concessional cap, it'll take him 5-6 years to maximise the tax benefits of the FHSSS. In those 5-6 years, are the property prices going to increase more than the amount of taxes he/she is going to save or is it going to be the other way around? (I obviously don't have a crystal ball, so I don't know the answer to that haha). The way the house prices have been (up until recently anyway), it might be better to just save as much as possible, as quickly as possible and just buy rather than hold out for the tax savings.
When this scheme started, the maximum was $30k total and $15k per year. So it was possible to put in $15k on 30th June. Then another $15k on 1st July (next day) and you've maxed out FHSS scheme benefit within 24 hours.
It definitely works better for people on a lower income who "happen" to have lump sums of money like $15K to put in.
Upon withdrawal of the $50K from the FHSSS, the amount is counted as taxable income, less a 30% offset. So for higher income earners on or close to the highest tax bracket of 45% (like OP is, with the current brackets), a large chunk of that $50K withdrawal could be subject to an additional 15% (45% - 30%) on top of the 15% contributions tax that was already paid at the beginning. That then reduces the total tax savings significantly.
This was what I was thinking of posting as well. Not just that, but I heard you have to apply for the money and it takes a month, then you have to buy in 6 months otherwise apply again.
Not saying its bad at all, its just with the amount OP is getting paid and the potential price of house I imagine the tax savings might not be enough to offset the risk/wait for money and potential price increase in the time it takes to purchase. Assuming OP is purchasing soon though. And circumstances may change that but yeah.
then you have to buy in 6 months
It seems to be 12 months now, so buyers have a bit more time.
It also says you can put in Non-Concessional Contributions as well (post tax money).
You can, however you don't save on tax that way
Some people put it in every July in the hope they earn interest in super on the money for the year.
Although it prolly amounts to the same thing.
It's not quite this bad because of the carry forward rule. OP almost definitely has tens of thousands of available super cap carried forward from the past few years.
Your taxes at work!
OP, sorry can't contribute (not in the 6 figure club yet). BTW, please use the correct acronym next time, FHSS is frequency hopping spread spectrum.
It's kind of pointless once you add up all the paybacks. Probably $5k all up but the greatest catch is liquidating your super assets when you need it. The damage done at that time is probably greater.
It was an LNP policy to be seen to be doing something when you really don't want to do anything in this space at all. That's why it's overly complicated and takes years to gain the full effect.
There are so many better policies they could have implemented to get people into their first home but they were never interested.
If you haven't maxed out your super in the last few years you may be able to 'top up' above the cap to make use of the full $15k FHSS contribution each year.
I worked as a loan broker for years before retiring, the best loan type is an offset loan, ignore the fact that the interest rate is slightly higher than A P&I … you'll save much more than the difference, and if you changed your lifestyle and lived like someone earnings a lower wage, you'll quickly build up enough equity to take a split and use that to invest (property being the best tax offset) ING are equal with many other lenders, They let you use your everyday account to live off during the month then sweep at the end of the month, meaning your purchases don't get paid till the end of the month … your earnings and whatever else $ you place into the account will offset the loan until swept, some people who lived carefully have paid of a loan that would have taken 27ys P&I in 11 years, some other's used the capitol to purchase investment property, many are now wealthy.
Forgot to mention, FHSS is a good scheme, I'd recommend it, read the jargon on ATO's site.
Are you a nurse?