New legislation aims to benefit first home buyers

Eligible first home buyers can now withdraw certain voluntary super contributions to put toward a home deposit.

Government proposals around improving housing affordability in Australia were passed through parliament on 7 December 20171 and came into effect on 1 July 2018.

As part of the changes, first-home buyers have been given a tax concession through the ability to save for a home deposit inside of super, while Australians aged 65 and over are now able to contribute the proceeds from the sale of their main residence (up to $300,000) into super. 

We take a look at what the changes could mean for first home buyers, bearing in mind that like with all important financial decisions, it's a good idea to get financial advice before deciding what's right for you.

Tax concession for first home buyers

Eligible first home buyers can now withdraw voluntary super contributions (which they've made since 1 July 2017), along with associated investment earnings, to put toward a home deposit.

How does it work?

Under the First Home Super Saver Scheme (FHSSS), first home buyers who make voluntary contributions of up to $15,000 per year into their super can withdraw these amounts, in addition to associated earnings, from their super fund to help with a deposit on their first home.

If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples.

Voluntary contributions can be made by salary sacrificing from before-tax income, by making personal tax-deductible contributions, or by making personal after-tax super contributions.

When the money is withdrawn, before-tax and tax-deductible contributions are taxed at your marginal tax rate, less a 30% tax offset, while after-tax contributions aren’t subject to tax.

Due to the favourable tax treatment, generally available through super, this scheme intends to help first home buyers grow their deposit more quickly.

Things to note

To make a withdrawal under the scheme, an application to the Australian Taxation Office (ATO) will be required, and an eligible person is only allowed one FHSSS withdrawal in their lifetime.

There are super contributions which will not qualify and cannot be withdrawn under the scheme, such as super guarantee contributions made by your employer, as well as spouse contributions.

FHSSS amounts that are withdrawn and not subsequently used for a property purchase must be put back into super as after-tax contributions, or penalties will apply.

The first home buyer must reside at the property for at least six months in the first 12-month period from when it can be occupied.

Additional rules may apply to your situation, so make sure you do your research before making any decisions.

Further reading that may be of interest

Where to go for more information

Like with most things, when you’re making a big financial decision, which could have implications, it’s worth doing your research and speaking to your financial adviser first.

If you don’t have an adviser but would like to seek some advice, you can call AMP on 131 267 or use our find an adviser search engine.

If you’d like to speak to an AMP Bank relationship manager about our current home loan rates, you can request a call back via our online form.

Contribute to your super

Find out about other ways you can make before and after-tax contributions to your super.

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Saving for your first home?

First home buyers could be eligible to use their super as a tax effective way to help save for a deposit towards their first home.

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