"The Pros Cons and Important Considerations"

One of the announcements in the Federal Government Budget for 2017-18 was the proposed introduction of a new scheme to help first home buyers break into the market. The previous scheme aiming to achieve a similar objective being the First Home Saver Account (FHSA), was unsuccessful and subsequently abolished on 1 July 2015.

If enacted, the new First Home Super Saver Scheme (FHSSS) is proposed to commence on 1 July 2017 and uses the concessionally taxed superannuation system to help first home buyers save for a deposit. Under the scheme, up to $15,000 per year and $30,000 in total can be contributed to super as voluntary superannuation contributions. Withdrawals will be allowed from 1 July 2018 onwards.

So what are the “pros” and what are the “cons”?

Pros • The $30,000 limit on contributions to the FHSSS is a per individual limit and

therefore a couple where both qualify as first home buyers have a combined

limit of $60,000.

• The contributions made to superannuation under the scheme are tax deductible,

either through salary sacrifice of wages or personal contributions claimed on the

tax return.

• In the majority of cases, the First Home Super Saver Scheme will provide a real

cash benefit to those saving for their first home. For example:

A couple, with incomes of $75,000 and $50,000 respectively could save an

additional $11,920 combined over three years towards their first home by

contributing the maximum $30,000 each under the scheme. (based on the ATO

Budget estimator tool – refer below)

• Those with higher taxable incomes stand to gain more due to the tax savings

being tied to marginal tax rates.

• A 30% tax offset is available to each individual on a withdrawal of funds from the

super fund FHSSS account. (The withdrawal is taxed at marginal tax rates – refer 'cons' below)

• Low income earners can make non-concessional voluntary contributions under

the FHSSS which do not attract tax in the super fund.

Cons • Contributions made under the scheme are counted towards the existing

superannuation contributions caps for individuals, ie. $25,000 for the 2017-18

year. If the cap is exceeded excess contributions tax will apply.

• Concessional contributions to superannuation are taxed at 15% in the Fund along

with any earnings from such contributions.

• Withdrawals from superannuation for the purchase of the qualifying first home

are taxed at the individual’s marginal tax rates plus Medicare levy for the relevant