How will the First Home Super Saver Scheme work?

The first home super saver scheme

Here’s how the recently announced First Home Super Saver Scheme will benefit Aussies looking to get into the property market

The 2017 budget announced a raft of changes to address housing affordability, some aimed at the supply side of problems that home buyers face, and others aimed at helping first home buyers save a deposit.

The biggest announcement was the First Home Super Saver Scheme, which at its core is a way that first home buyers can voluntarily contribute money into their super and then access this money to buy a property.

There are a number of benefits to this:

  • You might earn a higher return on the money because it’ll be sitting in a super account as opposed to a regular savings account.
  • You can salary sacrifice these contributions into your super account so they come from your pre-tax income. This means you’ll avoid being taxed for making deposits
  • The money in the account will be taxed at 15%, which should be a saving for most Australians who pay more than this with their regular marginal rates
  • When it’s time to withdraw funds, you’ll be taxed at a marginal rate less a 30% offsetFirst home super saver scheme graphic

So how does it work?

Depositing

Starting from 1 July 2017, you’ll be able to make voluntary super contributions into your account. If your employer agrees, you can make this through your pre-tax income to save on tax.

If your employer doesn’t agree to salary sacrifice or if you’re self-employed, you can contribute your post-tax income into the scheme and then make tax deduction claims on personal contributions afterwards. Money that’s deposited through post-tax income won’t be taxed when you withdraw it.

You can contribute up to $30,000 in total using the scheme, but each year has a maximum limit of $15,000. So far no maximum number of years has been given to use the scheme.

While you’re saving

While you’re saving this money, it’ll be taxed at 15% rather than your regular tax rate, which should be a saving for many. The earnings on any money you’ve deposited will also be taxed at this rate.

When you’re ready to withdraw

Withdrawals can be made from 1 July 2018, and when you’re ready to do so you’ll be dealing with the Australian Taxation Office (ATO) who is responsible for the scheme.

Pre-tax contributions will be taxed at your marginal rate minus a 30% offset. Your marginal rate is basically the per-dollar amount you get taxed in your tax bracket. So if you’re in the $37,001 - $87,000 bracket for example, your marginal rate is 32.5c or 32.5% of every $1 over $37,000.

Income bracketTax
0 – $18,200None
$18,201 – $37,00019c for each $1 over $18,200
$37,001 – $87,000$3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000$19,822 plus 37c for each $1 over $87,000
$180,001 and over$54,232 plus 45c for each $1 over $180,000

Source: ATO

Post-tax contributions will not be taxed when you withdraw them.

You can also withdraw the earnings that your money accrues while in your super account. Because you’ll be depositing these amounts into an account which already has non-First Home Super Saver Scheme funds in it, the amount of earnings you can withdraw will be decided using a percentage made up of the 90 day Bank Bill Swap Rate plus 3%.

The most common questions about the First Home Super Saver Scheme

When does the First Home Super Saver Scheme start?

If the scheme is passed by Parliament, it’ll be active from 1 July 2017.

What if I need to access the money for a non-home-deposit-related emergency?

Details have not been given as to how this will work. With regular super accounts, accessing your super early usually requires that you’re in severe financial hardship, are temporarily or permanently disabled, are diagnosed with a terminal illness, or on compassionate grounds. Compassionate grounds can include medical bills, funeral costs and more.

What else should I be wary of?

Because any money deposited under this scheme will be at the mercy of your super account performance, comparing super accounts and also updating your risk appetite will be crucial. You can compare super accounts in our guide.

Is there a minimum amount I need to deposit to be able to use this scheme?

There has been no mention of a minimum amount so far.

What if I’m self-employed or my employer doesn’t offer salary sacrificing?

If you’re self-employed or your employer doesn’t want to offer salary sacrificing, the scheme is still available. These first home buyers will be able to deposit their post-tax income and then reconcile these deposits during tax time, taking advantage of tax deductions for the contributions.

What if you want to buy a property before 1 July 2018?

Unfortunately there are no indications that the scheme will be able to help first home buyers looking to buy before the withdrawals period starts.

How do super account returns compare to regular savings accounts returns?

According to research by Chant West in 2016, median returns for super funds with a growth investment option were 3% for the 2015/2016 financial year. The top 10 performing funds for 2015/16 according to Chant West were:

Fund and investment optionReturn - 1 year to June 2016
QSuper Balanced7.6%
BUSSQ Balanced Growth7.0%
UniSuper Balanced5.9%
Catholic Super Balanced (MySuper)5.7%
Cbus Growth (Cbus MySuper)5.5%
MTAA My AutoSuper (Balanced)5.5%
REI Super Trustee Super Balanced5.4%
Statewide Super MySuper5.1%
HOSTPLUS Balanced5.0%
AustralianSuper Balanced4.5%

Source: Chant West

Note that this doesn’t take into account fees, taxes and commissions. Also note that past performance doesn’t give an indication of how these accounts will perform in the future.

You can compare a selection of savings account rates below.

Rates last updated September 21st, 2017
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
Bankwest Hero Saver
2.60%
0.01%
2.59%
$0
$0 / $0
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
ME Online Savings Account
2.95%
1.30%
1.65%
$0
$0 / $0
Ongoing, variable 2.95% p.a. rate when you link to a ME Everyday Transaction account and make a weekly purchase with your Debit Mastercard using tap & go. Available on balances up to $250,000.
HSBC Serious Saver
3.00%
1.60%
1.40%
$0
$0 / $0
Introductory rate of 3.00% p.a. for 4 months, reverting to a rate of 1.60% p.a. Available on balances below $1,000,000.
Westpac Reward Saver
1.50%
0.01%
1.49%
$0
$0 / $0
Ongoing, variable 1.50% p.a. when you deposit at least $50 and make no withdrawals each month. Available on the entire balance.
St.George Maxi Saver
2.80%
1.00%
1.80%
$0
$1 / $1
Introductory rate of 2.80% p.a. for 3 months, reverting to a rate of 1.00% p.a. Available on the entire balance.
Bank of Melbourne Incentive Saver
1.75%
0.01%
1.74%
$0
$1 / $1
Ongoing, variable 1.75% p.a. when you make at least one deposit and no withdrawals each month. Available on the entire balance.
Westpac eSaver
2.51%
1.00%
1.51%
$0
$0 / $0
Introductory rate of 2.51% p.a. for 5 months, reverting to a rate of 1.00% p.a. Available on the entire balance.
Bank of Melbourne Maxi Saver
2.80%
1.00%
1.80%
$0
$0 / $0
Introductory rate of 2.80% p.a. for 3 months, reverting to 1.00% p.a. Available on the entire balance.
Citibank Online Saver
2.85%
1.70%
1.15%
$0
$0 / $0
Introductory rate of 2.85% p.a. for 4 months, reverting to a rate of 1.70% p.a. Available on balances below $500,000.
BankSA Maxi Saver
2.80%
1.00%
1.80%
$0
$1 / $1
Introductory rate of 2.80% p.a. for 3 months, reverting to a rate of 1.00% p.a. Available on the entire balance.

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