There are various ways of leveraging your self managed superannuation fund in 2018. Ultimately, it will be pegged on your unique financial circumstances and your objectives this year. One of the ways to make the most of your SMSF is by taking advantage of the newly passed First Home Super Saver Scheme (FHSS) that now enables first time home buyers to use their superfund to build up the deposit cache for the purchase of their first home by making extra contributions to their superannuation.
Not only does FHSS help first-time homebuyers save on tax upon the withdrawal of the contributions and earnings, but the earnings on a super fund are typically better than those in a bank deposit. For first-time buyers, it is therefore more logical to save money in a superannuation and build up savings for the deposit more quickly.
It is a first time strategy that is worth trying out if you are planning to purchase a new home. If you are looking for a new financial arrangement that you can fully leverage in 2018 in order to bring yourself closer to home ownership, then this is it. With the Super Saver Scheme, you can use concessional and non-concessional contributions to build up the deposit for your first home without the risk of your funds being “trapped” in your super for the long haul. However, like all new rules, it is important to be familiar with the mechanics of the scheme in order to make full of use of it to meet your financial goals.
There are lots of savvy ways in which you can deploy the Super Saver Scheme to help you build a bigger deposit for the first time home purchase, either for yourself or your kids. The super saver scheme can allow a couple to save and withdraw up to $50,000 or $60,000 for the purchase their first home.
Like with any new financial strategy that you might be planning to apply in 2018, it is important to start planning early for a super saver scheme. Take time to research about and understand the new regulations. You can also talk to an accounting firm Melbourne professional who can help you make sense of the entitlements and advise you accordingly on how you can maximize on it with your current income and savings.
You need to also understand the merits and demerits of the FHSS scheme early on to enable you to organize the implementation in time. Leveraging the super saver scheme will not be an easy decision and the strategy is not simple either. You need to spend some time in planning and thinking things through before plunging into the implementation. While the ATO has comprehensive information on its website on the super saver scheme, the rules are complex (they always are where tax concessions are involved) and you will probably need a professional accountant to help you make sense of the rules and provisions in the First Home Super Saver Scheme entitlement.
Use your existing savings to make maximum contributions
In case you already have some savings, you can use these to make maximum contributions on your super saver scheme. The purpose of doing this is to earn more interest by the time you are taking out the payment. The maximum that you can contribute per year in the super saver scheme is $15,000 and the maximum overall that you can save in the scheme is $30,000.
This can be a better strategy to contributing tiny amounts to the super every year. The advantage with this is that the interest calculations for what you can take out will begin at the first deposit so you will earn more money in interests over several years if you save the amount at once than if you stagger the amount over several years. Someone who saves $30,000 at once to be withdrawn after 5 years earns more interest over the years than someone who saves $6000 per year over 5 years.
Have a “salary sacrifice” arrangement with employer
If you are unable to contribute large sums at once into your super saver scheme, you can also use a “salary sacrifice” strategy in order to fully leverage the entitlement. Under a salary sacrifice, you can decide on an amount of pay that you will not receive after tax. This will instead be channeled to your super fund before the tax is paid on it. The benefit with this is that it unlocks more money that you can invest as the contribution will be taxed at 15%, which is the super contributions tax rate, rather than at your marginal tax rate which can be as high 34.5%.
This is also advantageous because the super saver does not include the Super Guarantee (SG) by your employer so you can have the SG and the salary sacrifice running concurrently and both being channeled into your super account to help you build your savings cache.
Working out a salary sacrifice arrangement with your employer will induct you into the discipline and culture of setting aside some cash for your super saver account and having to do with less and over time, you will get used to it. It is much easier to save money this way than scrabbling to come up with a huge amount at once.
Familiarize yourself with the FHSS Structure
The super saver scheme allows you to accumulate a handy amount relatively quickly but this happens in an environment of very complex ATO rules. Before you plunge headlong into an FHSS scheme, it would be prudent to have the structure sorted out so that you can understand the strict regulations on contributions and FHSS payment release.
For example, you can make voluntary pre-tax contributions under a $25,000 contribution limit and the amounts are not part of the 9.5% compulsory Super Guarantee that every employer has to pay. It also possible to make after-tax contributions under an FHSS scheme that allows you to save up to $30,000.
To be eligible for the FHSS scheme, you must not have owned a home in Australia and you should be intending to live in the home that you purchase with the proceeds of the scheme as soon as possible one you have released the FHSS amount. On withdrawal of the funds, you will need to sign a contract to build or purchase a home within 12 months. As beneficial as it is, it is also a complicated regulatory terrain with tough rules by the ATO and you may need to hire a professional accountant Melbourne tax specialist to help you navigate the complexities.