Can I use my super to buy a house?
Most buyers can't use super to buy a house. But investors can purchase properties through an SMSF, and first home buyers can use voluntary super contributions to form a deposit.
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The short answer is no: in Australia you can't use superannuation to buy a house. But the longer answer is that eligible first home buyers can access up to $30,000 of voluntary super contributions to use as a deposit on a home.
And there are two other ways you can use superannuation to get a property: using a self-managed super fund to a buy a property, or accessing your super before retirement (in very specific circumstances).
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 saved over two years. 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.
Buying a home through an SMSF
You can buy an investment property through your self-managed super fund (SMSF) but you can’t use your super balance to buy a home you're going to live in.
This is because 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.
Compare SMSF loans to buy investment properties
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 ensure that Australians have 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).
Using super for 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 you fit this category 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.
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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.
- The first home loan deposit scheme. This new scheme involves the government guaranteeing 15% of your deposit, helping you avoid lenders mortgage insurance costs.
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