Using Super for House Deposit NSW

For most people, especially first home buyers that are trying to get a foothold in the real estate market, things can get confusing. In New South Wales, one is allowed to make use of their superannuation for assistance on a house deposit. If you do decide to use an existing super to buy your first house, don’t worry we’ll try to explain each step and help you as much as possible. We’ll cover a few topics such as how to use superannuation to buy a house in New South Wales, FHSSS, voluntary super, home loans, how to use your super for investment properties, and also provide you with other important information.

First Home Super Saver Scheme

The First Home Super Saver Scheme is an initiative of the Australian Government to make the process for first home buyers to save faster for a house deposit. This would make it easier for one to gain access to homeownership by allowing a first-time home buyer to withdraw their voluntary superannuation contributions for use in a house deposit.

How FHSSS Works?

The First Home Super Saver Scheme works in a few ways, such as:

Voluntary Contributions: You can make voluntary contributions to your super fund under the FHSSS of up to $15,000 per annum and $50,000 maximum across multiple years.

Tax Benefits: These contributions attract a concessional tax rate, which is way lower than your regular income is taxed, and this may help the savings grow more quickly.

Withdrawal for Deposit: After saving enough to buy your first home, you are free to withdraw these contributions, including associated earnings, to be used as a deposit.

Eligibility Criteria for FHSSS:

All criteria must be met if you want to be eligible for FHSSS, and those are:

  • You must be an 18+ year old, first home buyer
  • Have never owned any property in Australia, unless you’ve suffered a FHSS financial hardship.
  • The property must be in your name, and you must live for at least 6 months with the first 12 months of owning the property.
  • No previous FHSS release requests.

How to Withdraw Funds for a home in Australia

If you’re ready to withdraw an FHSS scheme amount and use that money to buy a property, please do the following:

Apply for FHSS Determination: Before signing a contract to buy a home, apply for FHSS determination from ATO to get to know how much can be withdrawn.

Release Request: You can then apply for a release request based on your determination and receive an eligible amount from your super fund.

Using Super to Buy a House

Using your superannuation to buy a house is a commendable step taken to ensure that first home buyers get into the property market much faster. Here is how you can use the first home super and save for your first home:

Make Voluntary Contributions: Start making additional contributions to your superannuation. These can be either before-tax, that is confessionally deductible or after tax, which is known as non-concessional.

Keep a Track of Your Savings: Monitor the balance in your super fund so that you get maximum benefit out of this scheme.

Apply for Determination: Finally, apply for FHSS determination to the ATO when you are ready to purchase the house.

Release Request: Once determined, request a release to withdraw the funds from the super account.

Use of Funds: The funds, once released, can be used for the house deposit.

Benefits of Using Super to Buy a House

These are some of the biggest benefits that come when you decide to use the FHSS scheme:

Quickened Savings: Through the lower tax rate on super contributions, one saves much faster.

Access to Earnings: You can gain access to your contributions and the earnings on those contributions.

Lower Upfront Costs: This means one would reduce the amount they need to save outside of super for the deposit by using superannuation.

How to Use My Super to Buy an Investment Property

While FHSSS is specifically designed for first home buyers, using superannuation to purchase an investment property follows different rules and guidelines. Here’s what you need to know.

Using a Self-Managed Super Fund (SMSF)

There are a few important things you need to do in order to use a SMSF:

Establish an SMSF: First, you have to establish a self-managed super fund if you are going to use superannuation money for purchasing any kind of investment property.

Compliance: Make sure your SMSF complies with the ATO’s regulations about requirements for documented investment strategy.

Property Purchase: It has to be acquired for investment purposes only, and cannot be occupied or used by you or any other related party.

Loan and Deposit: Your SMSF can use borrowed money in purchasing a property, but under a strict borrowing arrangement known as a ‘limited recourse borrowing arrangement’ (LRBA).

Benefits of using a super to buy an investment property?

High Returns Potential: Property investment will yield substantial returns, which could boost the growth of your super fund.

Tax Advantages: Income that the investment property generates is only taxed at a concessional rate, and capital gains tax discounts apply.

Key Considerations:

Complex Regulations: The running of an SMSF and ensuring that it complies with the law can be complex and requires constant management.

Costs: It can be expensive to establish and maintain a properly run SMSF, including administration, compliance, and auditing costs.

Risk: Any property investment carries risks associated with market volatility and possible rental vacancy.

Should I Use Super for a House Deposit?

Deciding whether to apply your superannuation as a house deposit can be an imperative financial decision. The First Home Super Saver Scheme allows first home buyers to make voluntary contributions to superannuation so that they can withdraw their savings towards making a deposit. It offers great tax benefits and a faster system of building savings. However, the major importance here is the impact it will have on your retirement savings in the long term and that accessing your superannuation to deposit a house aligns with your general financial goals. You may want to consult a mortgage specialist or a financial advisor to assist you in making an informed decision based on the situation at hand.

Conclusion:

Using superannuation to provide for a house deposit or to get into property investment is an extremely powerful means of financial strategy. The First Home Super Saver Scheme makes significant advantages available to first-home buyers, which are likely to enable them to create a deposit much faster. Regarding investors, an SMSF might prove to be a useful tool in using superannuation to invest in property, although this is a complex area that requires careful consideration and management.

As a team specialising in mortgages, our job is to help you navigate those options and ensure you’re making informed decisions directed toward your financial goals. First-time buyer, unscaling, or investing, we do all the hard work so you can enjoy the benefits. Knowing the different options available gives you all the chance to make the most out of your superannuation and eventually achieve what a lot of people can only ever dream of: owning a property in NSW.