Is it possible to use my superannuation to put down a deposit on a home?
In Australia you cannot simply access your superannuation freely to use as a deposit on a house. But first home buyers are now able to access up to $30,000 of voluntary super contributions (extra super paid on top of your compulsory contributions) for use as a deposit on a home, which also has significant tax benefits.
Read on to learn more about the scheme and other methods to use your super to buy property.
The First Home Super Saver scheme explained
In 2017 the federal government announced a new scheme to help first home buyers get a deposit together for a property purchase. The scheme came into law on 1 July 2018 and applies to voluntary super contributions made since July 2017.
First home buyers can access up to $15,000 in super contributions per year up to $30,000 in total per person. A couple buying a house could therefore use up to $60,000 in voluntary superannuation contributions. The biggest benefit of the scheme is that you can earn a higher rate of return on money in a super fund (compared to a savings account) while paying lower tax on the funds (just 15%) while lowering your pre-tax income if you salary sacrifice.
There are a few more ways you can use superannuation to get a property.
Buying a home through an SMSF
You can buy property through your self-managed super fund (SMSF). However, you can’t use your super balance to buy a principal place of residence, only an investment property.
This is due to the simple fact that superannuation is designed to fund your retirement, not to help you fund the essential purchases you make throughout your life. The purchase of an investment property is allowed because it gives you the potential to earn rental income and also take advantage of a capital gain when you sell the property, thereby increasing your retirement savings.
It’s also worth pointing out that there are limits on how much you can borrow when taking out an investment property loan through an SMSF, and the tax benefits of investing through super are different to when you invest using your own money. The finder.com.au guide to investing in property through your SMSF explains all the ins and outs.
Accessing your super before you retire
There are strict rules in place to prevent Australians accessing their superannuation balance before they retire. These rules are designed to stop Australians dipping into their super, ensuring that a greater percentage of the population has enough money to enjoy a comfortable lifestyle once they stop working.
In order to access your super before your retirement you’ll need to satisfy a condition of release. Some common examples that might allow you to access your super early are if you suffer a serious illness or disability, or if you are experiencing extreme financial hardship (including receiving Commonwealth income support payments). Unfortunately, simply wanting to access your super so you can put down a deposit on a house is not a condition of release.
But it’s not all bad news. If you’ve reached the preservation age, which is 55 years for Australians born before July 1960, and at least 56 for people born after June 1960, the rules surrounding early access to your super aren’t quite as strict.
If this is you and you want to access your super benefits to put down a deposit on a house, there are two options you can consider to help you get the funds you need:
- Retire. If you’ve reached your preservation age and you retire, you can withdraw your super benefits. However, you should be aware that you may need to pay tax on any super benefits you withdraw before reaching 60 years of age.
- Set up a transition to retirement (TTR) pension. This option is designed to allow Australians who have reached their preservation age to keep working while also accessing some of their super benefits – you can withdraw between 4% and 10% of your pension account balance each year.
There is a range of financial and taxation implications to consider if you choose either of these approaches, so ask your accountant for their expert advice.
If I can't use my super to get a house deposit what are my options?
If none of the options above work for you here are some other tips you can put into practice. These include:
- Look for other ways to save a deposit yourself. Check out our complete guide to deposit savings for more information.
- Guarantor loan. If your parents own their own property and are willing to help out they could guarantee a portion of your deposit. It's not without risks but it's a great option for some buyers.
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