First home super saver scheme

Individuals who are yet to purchase their first home will be able to withdraw voluntary contributions from the superannuation account for the deposit from 1 July 2018. This new measure was announced as part of the 2017/18 Federal Budget, delivered on 9 May 2017.

The new measure will start on 1 July 2017, meaning voluntary contributions made after this date will begin accumulating to prop-up the withdrawal balance on the first home deposit. The contributions will grow by a deemed earnings rate, being the Shortfall Interest Charge rate.

 

First home eligibility

If the home is being purchased by two first home buyers, both partners can access the scheme. If one of the partners who is purchasing the property is a first home owner, they are able to utilise this scheme. The only barrier is that the amount withdrawn from super is not more than the price of the property in total (which is very unlikely).

 

Eligible contributions

An individual will be able to make voluntary contributions into their superannuation of up to $15,000 per year and $30,000 in total. The contributions can be either concessional or non-concessional, but the voluntary contributions will count towards the contributions cap in the year they are contributed.

Voluntary contributions are written to mean not mandated contributions, meaning that amounts above 9.5% from an employer under an industrial award or enterprise agreement are not eligible to be withdrawn. Also, spouse contributions, government co-contributions and contribution splitting is not eligible.

The earliest time an individual can withdraw these funds are from 1 July 2018. This means an initial deposit in the 2017/18 financial year will have some time accumulating before it can be withdrawn.

As the contributions can be either concessional or non-concessional, an option exists to salary sacrifice amounts into superannuation to add voluntary contributions using pre-tax dollars.

Example
An individual with a salary of $50,000 with superannuation guarantee of the standard 9.5% (totalling $4,750) has a salary package of $54,750.
If the individual salary sacrifices $10,000 of their salary package into superannuation, a pre-tax super contribution of $14,750 is made. This brings the individual’s salary down to $40,000.
The superannuation guarantee contribution is based on the new salary which is 9.5% of $40,000 which is $3,800. The difference between the super contribution of $14,750 and the required SG contribution of $3,800 is a voluntary contribution of $10,950.
No salary sacrifice Salary sacrifice
Salary package $54,750 $54,750
Gross salary $50,000 $40,000
Superannuation (balance paid) $4,750 $14,750
Super guarantee (9.5% salary) $4,750 $3,800
Voluntary contribution $0 $10,950
In conclusion, a salary sacrificed contribution actually equates to a higher voluntary contribution. Note: There is currently legislation in progress to remove the additional voluntary contribution. It was an unintended consequence of the super guarantee legislation.

Withdrawal of funds

When the individual wants to withdraw their super saver amount, they must ask the Commissioner of Taxation for a release form. In this way, the system is the same as excess contributions.

The Commissioner of Taxation will inform the individual of the amount they may be able to withdraw, after calculating an amount to withhold. As it appears in the Exposure Draft, it appears that the superannuation fund will make the payment via the Commissioner of Taxation to the individual.

Upon withdrawal, salary sacrificed contributions and the deemed earnings will be taxed at marginal rates of taxation less a 30% rebate. For contributions that are non-concessional, the withdrawal will be tax-free on the contribution and the deemed earnings taxed at marginal rates less a 30% rebate. The rebate is a non-refundable rebate in the individual tax return.

The payment is made available to the individual, who can use the amount for a deposit for a first home. The individual utilising the scheme will then have 12 months to either:

  • purchase their first home
  • re-contribute the amounts back into superannuation, or
  • pay a balancing tax of 20% flat rate of the withdrawn amount.

As mentioned above, amounts that are not used within 12 months of receipt will be subject to a “first home super saver tax” being a 20% flat rate on the assessable receipt.

 

Home ownership rules

As the directive to pay the first home saver scheme amount is from the individual to the ATO, it is a self-assessment system. However, there are rules which must be followed in order to remain eligible to receive the scheme amount, they must:

  • be purchasing their first home. The contract will need to be sent to the Commissioner
  • intend to occupy the home as soon as practicable, and
  • occupy the home for at least six of the first 12 months of ownership.

Failure to do so may result in penalties levied by the Commissioner of Taxation, including additional taxes that will circumvent any benefit originally received from holding the amounts in super.

 

The source of this content is CCH‘s professional information services. Thompsons Australia has a professional subscription with CCH providing access to in-depth quality technical information and commentary used by Thompsons Australia in keeping staff and clients currently in formed.

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