How to Use Super for a House Deposit?

StalkingIbis on 13/07/2017 - 20:52
Last edited 13/07/2017 - 20:52

Since July 2017 the government has implemented a new scheme for first home buyers so that they can use their super to contriubte part of the deposit.

The articles I've read give an overview of the scheme, but dont really explain how to go about it.

I know that you cant use existing super, only from contributions made from 1 July 2017, a maximum of 15,000 a year, for a total of 30,000 and can only be accessed from 1 July 2018.

My questions.

If I wanted to go down this path and use some of my super to help with a house deposit, do I need to set up that account, or will all the super I normally pay (and my employer pays) be able to be used later?

What about the money that my invested super generates, will this count towards money I can use for a deposit? If so, will it just be the earnings from the portion of my super that got put in since july? Does it work this way, or is it paid a rate of interest?( if thats the case, it really makes me believe it has to be set up as a seperate account)

How does contributing extra work? I am a teacher, I think that I pay 5% and my employer pays 7.5%….How much are they obliged to match? Would this be a good way to reach the $15,000 yearly limit? I'm not very versed in the tax benefits of super, I'm still young-ish and havnt done much with super except select my investment strategies etc.

Thanks!

Financial

Comments

  • fraudie on 13/07/2017 - 21:05
    +4

    Be mindful that the scheme hasn't actually been legislated yet.

    My understanding is that it will be only for voluntary contribution, so not what your employer pays.

    • ESEMCE on 14/07/2017 - 08:23
      +2

      If it's going to be implemented, that's the way it should be too..
      Still think it's the dumbest solution (increasing demand) to a Supply side problem…

      • D C on 14/07/2017 - 10:24

        People who don't understand how supply, demand and inflation works (or know what a bubble is) think it's great apparently.

        The old 'First home saver account' was a better deal and no-one was particularly keen on that, so the levels of enthusiasm for sticking your spare cash into super (and possibly having it stuck there) are not high.

        Even the super funds think it's all a bit ordinary.

  • StalkingIbis on 13/07/2017 - 21:13
    +3

    Oh ok, that makes sense.

    So it is essentially just a way to stash away pre tax/lower rate of tax? dollars for home loan savings?….Sounds pretty lame

    • plmko on 13/07/2017 - 21:35
      +6

      The biggest savings will come from claiming the $15,000 as a tax deduction. For most people that is a 32.5% deduction.

      • ziaxk87 on 14/07/2017 - 18:05
        +1

        don't forget your super still gets charged at 15% so in reality it will be 17.5%??

        • Bramey on 17/07/2017 - 16:16

          Except the fact it then gets taxed on withdrawal at your marginal rate minus 30% so at most a 15% bonus

  • scruffypuppy on 13/07/2017 - 21:51

    Hadn't actually heard of this so thank you! Will definitely be looking into it

  • tsunamisurfer on 14/07/2017 - 00:27
    +6

    1) This has not come into effect yet.

    2) The idea of this is to allow you to contribute your own money into Super to save for a home whilst taking advantage of Super's considerable tax advantages (tax rate 15%).

    3) The consensus is that this scheme will not make a big impact for most people's endeavours to realise the Great Australian Dream, primarily because it is capped at 30k.

    4) You are on a teachers wage which means you are in the 3rd tax bracket of 32.5%. The benefit to you here is, over the 3 years, you can contribute $30k at a tax saving of $30k x (32.5% - 15%)
    = $30k x 17.5%
    = 5.25k tax savings (the overall benefit).

    There will be more benefits like the investment earnings is also taxed at the favourable rate of 15% but even if its 7% growth, you are talking about $30k x 7% x 17.5%, thats only a benefit of less than $400 in the final year of the scheme.

    So at a guess the benefit to you will only be able $6000 over 3 years.

    Do you think the property you want will grow more than $6000 during that same 3 years?

    • ziaxk87 on 14/07/2017 - 18:07
      +2

      and one keeps on forgetting if there is a recession then half of your super might get lost..similar to 2008-2009 scenario

    • StalkingIbis on 14/07/2017 - 23:06

      Thanks mate. You went above and beyond. I understand much better now.

      I think this scheme will only really be useful if its your regular super contributions that can be used. Otherwise if you're contributing extra and then it gets locked away solely for home purchase, and you don't end up buying a home…..sad days.

  • D C on 14/07/2017 - 00:41

    I keep forgetting, what causes inflation again?

    • [Deactivated] on 14/07/2017 - 01:39

      Only items counted under the inflation basket…not the biggest debt of people's lives or their biggest weekly expense :p :) Tomato blight, yes. House prices rising by 20% in a year, no.

      • D C on 14/07/2017 - 01:47
        +2

        Houses don't cause inflation because they're investments, right? (eye roll).

        The most surprising thing about this latest dumb idea in a long line of dumb ideas is it hasn't been implemented. There's still time, I guess.

        The 'first home-owners' grant for $7,500 pushed up prices by about $15,000. Oh dear, let's increase it to $15,000 then! Yup, house prices went up $30,000.

        What a stupid country, and we haven't even elected Donald Trump yet.

    • ThithLord on 14/07/2017 - 08:12

      Holy crap, do you even understand how this program works, dude? If you think it will cause house prices to inflate, you are sorely confused about what this scheme is going to achieve.

      • D C on 14/07/2017 - 08:54
        +1

        Oh look, it's someone who doesn't understand how inflation works.

        You, me, and 10 others rock up to the next house auction waving our extra $30k. Take a wild guess as to how much the final house price is going to increase by.

        Go on, take a guess.

        I'll wait.

        Here's a hint: you don't fix affordability by dumping more cash into the system.

        Even Malcolm Turnbull thinks it's a dumb idea, and he's not the type to shy away from something that he thinks will get a few votes.

        • ThithLord on 14/07/2017 - 08:58
          -1

          LOL. I understand how inflation works perfectly. I'm saying that this schematic won't cause inflation, you ignorant bogan.

          There is no extra $30k waving around. Every person still has to save the $30k deposit. You don't get to use your already earnt superannuation.

          Your whole thinking is that every single person is going to utilise this scheme, too. How ridiculous.

        • D C on 14/07/2017 - 09:06

          @ThithLord: Not everybody got the first home owner grant either and prices still went up $30,000.

          You only need a few people with extra cash to drive up prices. That's what happens when you inject cash into a market with a limited supply.

          Are you sure you understand inflation?

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