Expert Advice

Saving to buy your first home by salary sacrificing into a superannuation fund

Sharon Kelley6 October 2020
Young couple getting advice.

One of the options for first home buyers who are saving for a deposit might be the Federal Government’s First Home Super Saver scheme. Photo: File.

It’s a question often asked by parents and children – how are you supposed to save a deposit when you’re looking for your first home?

Saving enough money for a home deposit is recognised as a difficult thing to do, which is why governments are offering first home buyers both grants and tax breaks to help get a deposit together.

One of the often overlooked options is the Australian Government’s First Home Super Saver (FHSS) scheme, which allows first home buyers to deposit money via salary sacrificing into their superannuation account, earn the interest rate superannuation accounts earn, and be taxed at a lower rate when withdrawing the deposit, specifically for a first home.

PayMe Group executive chairman Ian Lindgren says while every individual is different, the scheme is an option first home buyers should at least discuss with their accountant or financial advisor.

“It’s definitely an option you should at least consider,” he says. “It may not be for everyone, but it ensures you get a tax break on your savings and that helps you build up your deposit sooner.”

Salary sacrificing is a method of dividing your pay before you pay tax on it, directing pre-tax dollars into your superannuation account, or a lease on a car, or many other eligible items, and reducing your taxable income during the financial year.

“If you decide to deposit your savings into a term deposit at the bank, you will pay your usual level of tax, which on average is 30 per cent, whereas if you salary sacrifice that money into your superannuation account, it’s taxed at 15 cents in the dollar,” says Ian.

Ian and Maria Lindgren at desk in PayMe Group office.

Ian and Maria Lindgren from PayMe Group. Photo: File.

When the FHSS scheme was first introduced in the 2017-2018 Federal Budget, the Treasurer’s media release claimed it would help prospective first home buyers save for a deposit.

“For most people, the FHSS scheme will enable them to boost the savings they can put towards a deposit by 30 per cent compared with saving through a standard deposit account,” said the media release.

“This will give prospective first home buyers a significant step up at a time when saving for a deposit is becoming increasingly difficult for many people.”

RSM Australia principal Thiru Kandiah recommends seeking advice prior to deciding on the best course of action.

“Clearly, the First Home Super Saver scheme is an incentive for the younger generation to save for a deposit towards their first home,” she says.

“They need to seek financial advice from either an accountant or a financial planner prior to [deciding whether to] contribute towards the FHSS scheme.”

If you are considering salary sacrificing for a novated car lease or a first home deposit, contact PayMe Group on 1800 082 006 to organise your deductions.

Original Article published by Sharon Kelley on The RiotACT.

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