If you’ve been trying to achieve the great Australian Dream of home ownership but are struggling to build a sizeable deposit, there are some alternative ways to do it. If you’ve ever wondered whether you can leverage your retirement savings for something other than retiring, you’ll be happy to know you can now use your superannuation to build a house.
Here’s what you need to know to build a new home or buy house and land using your super – plus the potential pros and cons to consider.
Ways to build or buy property using your superannuation
You don’t need to be in your golden years to enjoy all the wealth you’ve accumulated in your superannuation account. On the contrary, the Australian government has made it easier than ever to put those before-tax contributions to good use in a number of different ways.
1. First Home Super Saver (FHSS) Scheme
The First Home Super Saver (FHSS) Scheme allows eligible Australians to make voluntary contributions into their super to save for their first home. You can then apply to release these contributions, along with other earning, for your home deposit, provided you meet the eligibility criteria.
As with all government schemes, there are limits to the amount you can contribute and withdraw under the FHSS. That’s why you’ll need to stay across the latest guidelines from the Australian Tax Office (ATO), as well as speak to a financial advisor or tax agent to ensure any decisions you make are compliant under the scheme.
How does the First Home Super Saver Scheme work?
· Voluntary contributions: If you are eligible, you can made additional voluntary contributions to your super fund, which are then earmarked under the FHSS scheme. These contributions can be salary sacrifice contributions or personal after-tax contributions for which a tax deduction is claimed.
· Contribution limits: There are annual and total limits on the contributions you can make under this Scheme. For the 2024-25 financial year, for example, the maximum contributions allowed are $15,000 per financial year and $50,000 in total.
· Request for release: Once you’ve made the contributions, you can apply to release these funds along with any other associated earnings to help fund your first home.
· Eligibility criteria: To be eligible, you need to meet certain criteria, including being 18 years or older, never having owned a property in Australia and intending to live in the property as soon as possible.
· Tax benefits: Contributions made under the FHSS scheme receive concessional tax treatment within your super fund. When released, the taxable portion is subject to a lower rate compared to your marginal tax rate.
· Withdrawal process: After applying for a release, the ATO determines the amount that can be released and will instruct your super fund to make the payment. You will then need to sing a contract to begin the buying or building process within 12 months.
2. You’ve reached preservation age
Are you a retiree looking to downsize into a brand new home in your dream location? You’re in luck!
Once you have reached what’s known as ‘preservation age’, you can access your superannuation for any reason. For most people, that means you’re in your 60s and retired, or after you turn 67 – even if you are still working.
With the funds you’ve accumulated in your super over decades of working, you can pour everything into finding the perfect plot of land and building the home of your dreams.
5 Benefits of accessing your super to build a house
1. Access to helpful schemes: You can now access your super to build a house thanks to the FHSS scheme, which may also come with tax advantages and help you save for your first home.
2. Tax benefits: Contributions made under the FHSS are taxed at a lower rate, which translates to potential tax savings compared to standard super contributions.
3. Become a homeowner faster: Using your super can speed up your journey to homeownership, especially for first-time buyers.
4. Personalise your dream home: Building a home rather than buying an existing property means you can customise your home to meet your lifestyle needs and tastes.
5. Start building a portfolio: Directing your super toward property investment will diversify your portfolio and finally put you on the property ladder – with the potential for a long-term capital growth and financial security ahead.
3 potential negatives of using super to build a house
1. Less for your retirement savings: Drawing from your super to build a house can dimmish your retirement savings. This may impact the overall nest egg you are planning to rely on during retirement.
2. Impact on compound growth: The compounding effect of superannuation can be huge over several decades. Early withdrawals may interrupt this compounding growth and limit your potential wealth at retirement.
3. Strict eligibility: Accessing your super to build a house involves meeting strict eligibility criteria.
Bring your dream home to life
Start making your super work for you – even before you hit retirement age – by using it to fund your dream new home. When you build with any home builder part of the NEX Building Group you will have exclusive access to MyChoice Home Loans. Our team will put you in the best lending position when we call on our relationships with some of Australia’s leading lenders. Why not use our borrowing capacity calculator to understand exactly where you are on the journey towards homeownership.
