Under the First Home Super Saver Scheme, individuals (who've never owned a home) are accessing a portion of their super savings to do so.
First home buyers have withdrawn more than $5 million from superannuation funds1 across the board under a federal government scheme designed to make housing more affordable.
Townsends Business and Corporate Lawyers special counsel Michael Hallinan said he was surprised there had been such significant uptake in the scheme's first few months of operation.
This was because there seemed to have been too little time to accumulate sufficient eligible contributions to make accessing the scheme – which can only be done once – worthwhile.
The First Home Super Saver scheme has been up and running since July 1, 2018.
Under the scheme, individuals who have never owned a home can access a portion of their super savings to buy a home (if they meet eligibility criteria).
The scheme works by allowing people to make voluntary additional contributions to super and subsequently withdraw those contributions.
Because super is taxed at the comparatively low rate of 15%, savings accumulate more quickly.
Withdrawals are capped at $15,000 per year and a total of $30,000.
Any earnings on the money while it was in super can also be withdrawn. Earnings are not capped.
To access the scheme, would-be homebuyers first need to approach the Australian Tax Office (ATO) for a "determination" of how much money is available for release.
Between July 1 and August 6 of 2018, taxpayers made 1,449 such requests, according to Mr Hallinan.
The next step is to request a "release authority".
Of the 1,449 determinations, 592 individuals applied for a release and the ATO authorised 498 requests for the release of $5.3 million, Mr Hallinan said.
"This level of uptake of in the first few months of operation is surprising for a couple of reasons," he said.
"First, there would seem to have been too little time for a material amount of eligible contributions to have been made, and only one year's worth of earnings accrued," he said.
"The second is that the scheme operates on a once-only access basis.
"While an individual can make any number of requests for a determination, they can only make one request for a release authority.
"If the authority is issued then the individual can no longer request another release authority even if they continue to make voluntary super contributions or did not use the released amount.
"The scheme was one of several housing affordability measures announced in the 2017 federal budget.
"For most people, the First Home Super Saver scheme could boost the savings they can put towards a deposit by at least 30% compared with saving through a standard deposit account," the budget papers said.
"This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation."
This article was originally published by The Financial Review on 15 October 2018. It represents the views of the author only and does not necessarily reflect the views of AMP.
11 steps to financial independence for Australian women14 May 2019 | Manage my money You never know what’s around the corner so it’s important to take control of your finances. Find out more with AMP. Read more
3 biggest household expenses05 November 2019 | Manage my money We check out the three largest contributors to household spending in Australia and where people would source cash if living expenses increased. Find out more with AMP. Read more
5 life insurance questions you’ve always wanted to ask24 April 2019 | Manage my money Find out what impact your weight, age and smoking status may have on your ability to buy life insurance. This list from AMP explains the impact of these factors. Read more
This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.