14 February 2023
With housing prices rising over the past decade, the Great Aussie Dream of owning a home can seem just that – a dream. But did you know you can use your super account to help save for your first house deposit?
In this episode, host Anne Fuchs and super educator Megan Ashenden break down how the First Home Super Saver Scheme works and the pros and cons of taking money from your super to buy your first home.Listen to more podcasts
Hello and welcome to
Australian Retirement Trust's podcast series on the economy, investments
and all things impacting your superannuation.
My name is Anne Fuchs
I'm Head of Advice at Australian Retirement Trust.
The team and I help our members, day in, day out, 2 million of them, plus
hopefully all of them are making really good decisions
about their retirement savings because it's so very important.
Today I'm sitting here on Turrbal and Yuggera country
so I'd like to pay respects to Elders past, present, and emerging
and with me is Megan Ashenden, she's one of our Member Education Officers.
It's wonderful to have you here. Thank you, I'm so excited to be here.
Welcome to Super Insider podcast
we have a lot of fun here
so, you know, I hope you've got your sort of
belts and braces on as we
strap in and have a good Absolutely. I've watched all
the podcasts and I am so excited to be part of it.
Now today we are talking about
using superannuation to buy your first home
but before we do that, we have to make sure we meet
our, sort of, tick a box, with the not tick a box Compliance people
we would never tick a box. No, we wouldn't tick a box.
We love doing a general advice warning.
So before we start, I do need to just let everyone know that
what we're going to be talking about today is general information only.
So any advice doesn't take into account your personal situation.
You should consider your circumstances and think about
getting personal advice before acting on anything we discuss.
Now, of course, you can always
get copies of our Product Disclosure Statements on our website
or by calling us on 13 11 84
if you have a Super Savings account
or 1300 360 750 if you have a QSuper account.
Bravo. That's fantastic.
Now we are talking, you know, superannuation and buying a house
I know there's been, there was, lots of research that’s
come out over the last year or so about people
that, when they retire, if they own a home they’re
in a much better position than if you aren't a homeowner
so I guess this is a really important thing to weigh up.
Yeah, absolutely. It's so topical.
And look, you and I, before we started recording
we were talking about kids starting school
my youngest is starting high school
and, you know, we bought our house
you know, we were probably 30, I think, our first home
so I'm well and truly past thinking about buying a first home
I'm in a different phase of life
but, you know, if I can ask a personal question, have you
did you use superannuation to buy your first home?
I didn't, and was because the scheme didn't actually exist
so I think it was introduced, I think, six months after
we bought our first home and so I couldn't take
advantage of it, which you know, it was a little disappointing
but, I now get to help others understand it and obviously
be able to use that information so that they can hopefully buy
their first home. So when they announced it
you were probably in your head going "Oh no, I could have done with that."
Yes, yes it would have been very, very helpful
but, you know, obviously,
they were the rules back then, so we made it work
and, as I said, now I just get to help other people take advantage of it.
And so I guess today we're talking about weighing up
the pros and cons because that's the reality,
everyone's situation is really different as per the general advice warning
And so we're going to just uncover what you should be thinking about
what are the advantages
disadvantages and what you need to do next
if you think it might be something you should do.
But I guess starting with
if you look at superannuation, it is a long-term investment
so what are the, you know, using
but so is, also is, your first home I guess, property ownership
so when you heard that announcement
and you thought, “What is cool about using super to buy your first home?”
Well, I think it's really important to understand that it's, you know
it's not necessarily detracting from the purposes of super
which is for retirement, because employer contributions
can't be accessed.
But overall, super, one of the really great benefits
are the tax concessions, we can pay less tax in super
and so we can use this scheme to, again, pay less tax
allow us to contribute personally into super
and if we're paying less tax
we have more money, we can save faster
we can get that money for the house deposit sooner
so that we can actually get onto the property ladder.
So I'm sure you had a few people's ears prick up with less tax.
Less tax, yes. And property
so, maybe for our younger listeners, where superannuation is still maybe
a new thing, do you want to explain that concept of you
can't use your employer, you use personal
what does that mean?
So whatever your employer has to pay
and right now, as it currently stands
that's usually a minimum of 10 and a half percent of your salary
so employer contributions can't be withdrawn for the purposes of super.
So you're still going to have that money being invested
and growing, and that’s going
to be there for you in retirement.
So what you are able to access
for the First Home Super Saver Scheme
which is an absolute mouthful
but for the first home scheme, any personal contributions
that you, yourself make into super
subject to some limits and all of those rules
but, you know, the contributions that you make,
they can then be withdrawn if you meet the eligibility criteria
and it can be put towards
that sort of deposit to be able to buy the first home.
So the benefits, you mentioned
so if you’re, the tax component and there's probably compounding
interest and investments versus term deposits
so let's actually break this up.
Yes, so step one is obviously adding money in, in the first place
and so where it can be really
helpful is to use the power of a salary sacrifice scheme
or tax-deductible contributions, because generally in super
those kind of personal contributions are only being taxed at a rate of 15%
and for most of us
our marginal tax rate is a lot higher.
So if we're paying more in tax
we don't have as much every payday, after tax, to save
but if we're able to pay less tax, then it's going to, theoretically
give us more take-home pay, which will allow us to save more
faster, to hit our savings goal.
Okay, yes. So we're saving on tax
then of course, that money is contributed into the super
environment and that gets invested
and compounding earnings and all of that
and in terms of growing over a long-time frame.
there's sort of some deemed earnings that are applied to these monies
that are being contributed, and that can actually be greater
than what you would get back as a term deposit
or as interest rates, for example
so we've got, you know, two advantages here
we're able to pay less tax
save more faster. Potentially have it grow more as well
and then the third benefit is that, and this is something
that would have been really helpful for me
is that we're not able to withdraw
those funds until we're ready to go and buy the house.
So if you think about it, you know if you're saving
You can't go on a holiday because you've changed your mind.
Right. You can't just suddenly make a withdrawal, do an online transfer.
Oops I bought something. Correct.
So that can actually be a big benefit for some
because it's that sort of out of sight, out of mind
And it's only when you're ready
because there is some admin and, you know, some extra steps involved
but yeah, locking it away and it's the same concept of superannuation
we can't typically access it until we retire and that
might not seem that great at the time
but out of sight, out of mind, have it grow, have it contribute
it's just there in the background working hard for us
we've got more in retirement
same concept for the First Home Super Saver Scheme
just on a shorter time frame.
We've had Brian Parker on Super Insider
talking about the 2023 outlook
and talking about superannuation being a long-term investment
what would you say if you have one of our younger members
you know, obviously if someone's really young
and they've got a lot, they're going to be
they're five years out from buying a house, probably something different
to someone who's maybe a year or two away
what would be your just, sort of, top tips around the timeframe around using this?
so, and again
this is probably
where we need to talk about the rules
because there's always rules with super.
So there are maximum amounts that you can
personally contribute into super for the purpose of the first home scheme.
Yes let's get into, yes.
So remember employer contributions you can't access
it's the personal contributions that are actually coming from your
your money effectively, and so that you're able to contribute
a maximum of $15,000 per financial year. Which is a lot of money.
It is a lot.
Some of us actually may be in a position
where we're able to save more than that
So remember First Home Super Savers Scheme's
possibly not going to be just in isolation alone
it would be a bit of a combination of first home and other savings
so if you've got the capacity to save more
we can do that outside of super.
So $15,000 going into super per year
and we do have to remember that the ordinary contribution limits
do apply for both before and after-tax contributions.
So $15,000 in every year and then the maximum amount
that can actually be withdrawn in total is $50,000.
So it does mean it's not a you know, it's not a
a quick sort of process.
Now, obviously, if you're wanting to buy that house
sooner, you can just withdraw whatever funds have been contributed
but to get the maximum benefit 15, 15, 15, and then a little bit more
theoretically, it would be over about three and a half years.
And I think a lot of members probably with cost of living and, you know,
everyone's tightening their belt, saving $15,000 is
It's difficult. It's hard, it's challenging
so, yeah, it's you know, you're not necessarily going to be able
to buy your own home overnight, but slow and steady wins the race
and then again, especially to help with these cost-of-living challenges
if we can pay less tax, we're able to save more money faster.
But what about if the members are worried about
if they're putting the money in and there's some
and there's still this volatility in investment performance
and there's a further downcycle and they think, oh, well,
my money's going to go backwards
where at least if I put it in a cash account, that's not going to happen?
Yeah, that's correct
and you know like all things in life
there are pros and cons and considerations,
but in terms of the earnings that are applied for the
First Home Super Saver Scheme I told you it was a mouthful
there's a deemed earning rate
that's actually applied. Okay, and what is that deemed earning rate?
Oh you're really testing my memory bank right now.
It does vary
so the best place to find out what it is
currently would be on the ATO website there will be information there.
So what are the, I guess disadvantages if there's any?
Can you think of
Well the disadvantages can be, I mean that
if for whatever reason you don't end up going down the property route
in terms of purchasing the property, like all contributions
to super, you typically won't be able to access them until retirement.
So if you do, you know, save this money
and then obviously not access it.
Something changes in your life and you're not buying a house.
the good news it will mean
more for you in retirement because you'll have those
Now, there are also some tax implications.
So it's not always right for everyone because if you're on a lower tax
rate, the tax savings or the tax rate super
versus outside of super may actually not stack up for you
so that's why getting advice, doing your research is really
It also must be used for the purchase
of a residential property
in other words
you've got to be owning and living in it,
so you can't use it for an investment property
also things like tiny homes, mobile homes, caravans,
houseboats, you can't do it.
It's got to be, you know, a bricks and mortar home.
The, you know
there's always just, I suppose the risk then as well of
you know, from a cash flow perspective
as I said, we've already talked about the rules changing but
admin there is a process involved, you've got to apply via the ATO
and like all things bureaucracy, there is a bit of a timeframe
so make sure that you allow that
in terms of
you're not going to get the money the very next day
so be aware of the timeframes
and if you do withdraw the money and you don't go through with
the property purchase, so you've got 12 months
typically once the money is in your bank account
to actually go and sign the contract and purchase the
home, you can get an extension if you need to
but if you don't actually use it towards buying your first home
then there will be additional tax that you have to pay.
So I suppose you want to be pretty sure that you're
ready and rearing to go. Correct.
Is there any impact for our low income members where the
government helps encourage people to put more money into super
is that something else in terms of a benefit?
Yes, so the co-contribution that you might get
what the government has paid in for you won't count as an eligible
contribution for withdrawal
but of course your personal contribution
that's enabled you to get the co-contribution
in the first place, obviously, will count.
Yes, because I was thinking some of our maybe financially
savvy members who are in that
situation where they can access
the co-contribution might be thinking
"Oh, cool, double."
No, no, unfortunately not
but overall, you know, this scheme can be quite positive.
So, you know, I like everything read the rules, make sure it works
for you and get some advice and really sort of get that finetuned
to make sure that you're sort of, you know, dotting the I's, crossing
the T's and taking advantage of it as it best suits your circumstances.
Where would you go if you're a member and you're thinking about this
where would be, where would you go to get some more information?
Well, firstly jump online.
So just onto the
Australian Retirement Trust
website and then we're going to
of course link you to the ATO as well.
So we'll have some information on our website
but at the end of the day it's an ATO administered scheme
so they are sort of the gospel truth
so there's information there and you'll be able to, you know
read over it and go through the process and understand it better
and then if you need advice, that's something that we can provide
yes, so utilise that. Yes, I guess could they
talk to their accountant or if they have their adviser as well?
if they've got their own adviser, their own accountant
that they're already comfortable with
you know, it's they should be all over this scheme
and they'll be able to help them understand how it can work.
Look, I think, you know, it's hard for young people
to get into the property market. Really, really hard
so, you know, and as I said, there was this research
undertaken about the power of home ownership in terms
of actually having a dignified, financially secure retirement
so this is why I guess we've got this podcast series today
to help our members really have that financially secure retirement.
because, you know
outside of, the home is generally going to be one of our largest assets
and then we've got our super as well
and so that can really work in combination with one another
so yeah, being able to take advantage of these newer changes
can be really beneficial.
Well, thank you so much for coming onto Super Insider.
Have you had fun?
I've had so much fun. Well, I hope you'll come back.
I will, absolutely. Okay.
Well, we hope our listeners that this has been useful again
Megan has suggested looking at our website at
going to the ATO website, picking up the phone
or speaking to your adviser or accountant.
If you like these podcasts please like us on your streaming
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Thank you for listening and we'll see you again soon.
This podcast is general information only and brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) as trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).