First Home Super Saver Scheme Case Study

The first home super saver scheme is a tax efficient strategy of assisting first home buyers utilise their superannuation as a means to buy their primary residence. In this case study we are going to be discussing Tom (30) and Tilly’s (28) financial situation and how they achieved buying their first home.

Financial Snapshot

Tom is working as an Engineer all the while Tilly is working as a Digital Marketing Manager. Both are employed on a full-time basis and their situation is summarized below:

Understanding Tom and Tilly’s Financial Needs

Tom and Tilly found it difficult entering into the property market due to increasing home prices in Sydney, in particular they were looking to buy in an area within relative proximity to the CBD where they both worked. Both had accumulated a significant cash saving for $100,000, which was struggling to maintain their purchasing power and keep up with inflation. The motivation for buying a home was to one day start a family. There was also a gap in their situation where they had not reviewed how their superannuation accounts were invested and they had no personal insurances should something such as a significant sickness, disability or premature passing would affect their welfare and livelihood. After their savings they found that there was nothing left at the end of the month to further contribute to their goal.

Financial Objectives

To buy a home in Sydney for $900,000 where they wish to put down a home deposit of $200,000 in 4 years time.

Strategy Consideration: Eligibility for The First Home Super Saver Scheme and How It Works

• Available to first home buyers over 18 and never owned property in Australia
• Allows voluntary conributions to superannuation (up to $15,000 per annum and $50,000 in total)
• Contributions are taxed at 15%
• Individuals can withdraw eligible contributions plus associated earnings to fund home deposit
• Must apply to withdraw funds and enter a contract to buy or build a home within 12 months of the release

Strategy and Trade Off’s

Upon reviewing their financial needs both Tom and Tilly weant through the following steps with their advisor and implemented the strategy recommendations in the form of a Statement of Advice.

After further investigation to both Tilly’s situation, her father was able to help with their objective by making distributions from his family trust to Tilly as she was a beneficiary. These distributions could then be used to ‘top up’ her extra personal deductible contributions and could be claimed as a tax deduction.

Outcomes

There are several factors to consider with such a strategy, including:

• Ensuring that both superannuation accounts aligned to their respective 85% Growth Risk Profile
• Tom could make an overall tax saving of $2,250 by making a personal deductible contribution of $15,000 while Tilly was able to make a tax saving of $3,400 by making a personal deductible contribution of $15,000 as well
• The returns on their superannuation account were deemed at a rate of 5% (90-day bank bill rate plus 3%). This meant that over the 3 years of additional contributions Tom and Tilly were each able to withdraw approximately $52,000 to contribute towards their first home
• Achieved their objective of utilizing existing savings plus superannuation contribution to use as home deposit for primary residence

Further Considerations

As part of the advice provide to Tom and Tilly they also considered the other areas of financial advice which were:

• Personal Insurances: Life, Total Permanent Disablement Insurance, Income Protection & Critical Illness
• Offset Account
• Gearing
• Children’s Education Bonds

Learning More

Want to talk about your personal situation with one of our advisors? Click on the banner below for a free no-obligation 30-min catch-up with one of our experts.