The Government will encourage home ownership by allowing future voluntary contributions to superannuation made by first home buyers from 1 July 2017 to be withdrawn for a first home deposit, along with associated deemed earnings.

Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30% offset. Combined with the existing concessional tax treatment of contributions and earnings, this will provide an incentive that will enable first home buyers to build savings more quickly for a home deposit.

Under the measure up to $15,000 per year and $30,000 in total can be contributed, within existing caps. Contributions can be made from 1 July 2017. Withdrawals will be allowed from 1 July 2018 onwards. Both members of a couple can take advantage of this measure and combine savings for a single deposit to buy their first home together.

This measure is expected to have a cost to revenue of $250 million over the forward estimates. The ATO will be provided with $9.4 million to implement the measure.

A previous scheme, the First Home Saver Accounts (FHSA) scheme, was abolished from 1 July 2015, although people still have until 30 June 2017 to make claims for government contributions. The scheme operated on the basis that people made contributions to a FHSA which then resulted in a government contribution, the amount of which depended on how much the individual’s personal contribution was. To claim a government contribution, the person must have been a resident of Australia for tax purposes.

The main features of that FHSA were as follows:

  • The government made a 17% contribution on the first $6,000 a person deposited each financial year. For example, a personal contribution of $1,000 would result in a government contribution of $170.
  • The interest a person earned on their account was only taxed at a rate of 15%.
  • The person had to save at least $1,000 each year over at least four financial years before they could withdraw the money. The four years did not have to be consecutive.
  • The maximum account balance was capped at $90,000. After savings reached this level, only interest and earnings could be added to the balance.