Good morning everyone, and welcome back to Sugar Mama's Fireplay. I am your host financial planner, and today in the studio we actually have three brains working for you. We have Richard Nichols, financial planner from Blue Lanton, and his colleague who we all know and love, our number one
mortgage broker, Adam mckabe from Blue Lantern as well. Now today we're going to be talking about and unpacking for you the First Home Super Savor Scheme which was designed to help young Australians build up a deposit via their superannuation to help afford property. That is, get together that very important deposit. Now, there are a lot of things to know, understand and do for this First Home Super Saver Scheme and some of these things you may have
not heard of before. So we're going to be unpack it here right now for you. Richard and Adam, thank you so much for coming in today. Now we all know that the First Home Super savest schemes, just a bit of a mouthful, is designed to help Australians get together their deposit, which for a lot of people is really hard. You know, there's so many distractions, so many temptations.
Can you explain to everyone how this works and how it can help people have that deposit ready to go to get their foot in the door at the property market. Obviously for first home owners.
In simple terms count it's designed to help people save I think from early days. So you're looking at, you know, if you've got aspirations to buy a property and your savings are low, this is a way that helps you get ahead from the normal means where it's just a high interest account at the moment. High interest accounts to
say four to five percent, which isn't a lot. So it gives you the opportunity to contribute up to fifteen thousand per year and then withdraw up to fifty thousand over a five year period for that first time.
So this is definitely not for people who need to buy it buy a property in the next six months. This is something you particularly for someone maybe that's a student, you know, maybe doing tertial education and thinks, okay, well, when I do get graduate and I get a job and you know, I've had a full time job and a salary for a couple of years, there potentially my deposit could come from this.
If it's still a mail that's right, and perhaps you know, there might be circumstances where if it's timed in terms of a taxi where you could put a large amount in and get a small benefit from tax savings.
In doing it. But primarily it's designed for that longer term strategy which is allowing you to also withdraw the earnings from that associated super contribution.
So for any of the listeners out there who have, you know, teenage children, this is something you know you should be talking to your kids about. Is it a potential option to be able to get your foot in the door, particularly if they know about it now and they can start sort of planning preparing.
Definitely, particularly if we're looking at the average super returns, you know it's probably probably double your potential return through general banks saving.
Yeah, and obviously we've got to keep in mind, you know, marcut volatility and you know, depending obviously, and how that superinhuation money is actually invested is also incredibly important. You will come to with Richard in a moment. Who is eligible for this.
The eligibility is really open, so as long as you're eighteen years of age, you don't need to be Australia resident or citizen. First home buyer. It's a really open scheme.
Single parents who've never bought before.
Wow.
Okay, so it really does start to open up, you know, opportunities for a lot of people that may have had that sort of block there previously. What would you say there are any misconceptions around around this, probably.
Around the tax side of it. You know that it's full fully tax exempt, which isn't the case, you know, and you know you really should speak to your accountant around advice in that regard, and.
Always get advice before you make the delisions because you don't want to sort of have any regret.
No, absolutely, and particularly if you're looking at calculating what you'll be able to withdraw at the time of buying, you need to be familiar with with what will come out and those tax implications as well.
All right, for young families that think, okay, this may be our hope to be able to secure a property, how do they maximize this benefit?
Well, to maximize it, you probably need to be saving for a longer period of time, So start as soon as you can, Okay, get those contributions going in and as we said, be familiar with what investment that is going into within your super fund, So speak to your superphone and look at you know, minimizing the risk I guess of the asset classets in. At that point, you're doing as much as you can. The longer you're doing it, maximizing how much you can put in and take cout.
You're getting some tax savings on the way and hopefully a much higher return than what you're getting within a normal bank or turn deposit account.
Can a couple or say a family, you know, we've got two working adults that are both never earned owned property before. Can they each use their superannuation schemists system and a combine their deposit.
Yes, absolutely, And that's that's particularly from my experience, what I've what I've been doing with kinds of mind that have taken advantage of this scheme. They've both contributed the same amounts well, depending on you know, if we're talking broadly,
depending on the income levels of each family member. But if you're on an equal income and you can contribute the same amount, then then ideally come the end of that stage, you both contributed the maximum and withdrawing the maximum for that purchase.
Richard, I'm interested to know your thoughts of this because when this first came out, I was really concerned that people would then start use their superannuation money, which is something really I see is something and being like a bit of a treasure chest that's long away and take you away from distruction and temptation and reckless spending and really sort of changing people's mindset. What are your thoughts when you saw this come in?
Similar concerns, But I think with this really you must remember that these are contributions that probably wouldn't have been made to start with. You know, people are putting in the fifteen thousand with the object of withdrawing for a property deposit, so it's not really taking away from their retirement assets because this money wouldn't have gone in in
the first place. Yeah, you know, if they are concerned about marketing volatility, most super funds will have a defensive option that they could place this money.
In, and they're normally you know, assets such as cash and fix interest still investments and still have some volatility in fluctuations, but less aggressive indeed.
And also the return while the returns may not be hugely different to you would get sitting in a bank account, in a defensive asset within super the tax side on those earnings would be a lot less because your tax on earnings inside a super is fifteen percent, whereas you're going to pay your marginal rate, and if you're at top marginal and that's forty five percent, you're going to pay on any on the same earnings outside of super. So you know, a you've got that potential for increase return.
But be more importantly, you don't pay as much tax on the earnings along.
The way, and I think the average Australian is paying about thirty two thirty so instantly there as almost like you know, doubling you with your NEPH. Indeed, all right, there are some changes coming up in I believe September for the this scheme. Can you just explain what the changes are and what we need to be aware of if we're contemplating, you know, setting this up and potentially using this in five years time.
The changes are very small, mainly to be able to fix errors within the applications and how you contributed those funds. And also if you change your mind, you know, sometimes your circumstances change and you're no longer in a position to buy, and that that could be a considerable time away. So then there are options to withdraw all that money back out.
So what happens, for example, you know, say I want to do this as the first time, and I set it up and I'm contributing to it. Then say I win the lottery, you know, and I can now buy you know, I have a deposit now that money though, I can still potentially get it out.
But if you win the lottery, you probably don't really care.
Well, it depends not much, I m of course, mostly. I mean it might be one hundred thousand, or it might be you know, a couple of million dollars, which would be great, but you know, because obviously we need to be realistic things. You know, situations change, people might move overseas. You know that that dream, that goal, you know, may pivot. We need to be aware of those things that you know, if we've been contributing to it, we can't get that money then back out.
Yeah, so you can get it back out, you can, And it's it's essentially the same process for applying for the deposit to be returned to you for a purchase. So you need to apply for a determination through the ATO, the ATO then process that claim after you sorry, after you claim it through your super fund. It gets returned to an ATO holding account as I understand it, where they then process a determination if you're taking it back
out not to buy a property. That's when they apply the marginal tax rates.
Yes, okay, so this is what I'm saying is you know what if I decide, ahually I don't need that, you know, money returns up big enough to posit, or I'd inherited some money with something because these you know, with an aging population of baby boomers, these are things that actually.
Could something happen, And if you didn't need it anymore, then it's in the best place it can be in your super fund exactly.
Wouldn't you a mode if you don't need to take it out.
And keep it that?
Yeah, yeah, it's only going to help, you know, create greater financial stability for your long run financial benefit. Absolutely. All right. There's all about the rules of the first I can't even say, probably the first home owner super skate super saber scheme. What are the things you need to know when you've got to apply.
Yes, so you need it needs to be going as a voluntary contribution, so your accountant needs to be aware of that, and the super and contacts is super fun to advise them of the contributions you're making, so that's allocated towards the super SAVIS scheme that can be withdrawn once your love's a determination.
Do you think this is something Richard, that someone should go and see a financial planner about if they're thinking about.
Doing Ah, yes they should that or their accountant, either one of those would be able to give them the information they need to make that determination, or even the super fund themselves.
Well, a lot of super innuation accounts. Now, how this general advice has none by like a one one hundred now one eight hundred dollar that you can access free advice. But also I think you're talking to a financial planner just having that meeting of mind, talking about okay, well, what are your goals? Why do you want to buy a home, what's important to you? Where do you see your future? Where do you want to live? You know, what's the lifestyle that you want? You know, what where's
your value system? Having those important conversations may actually uncover that maybe property is not what you want to do, and in fact you are look at an investment portfolio you want to look at focusing more on your superannuation so that you have that piece of mind knowing you can retire and retire on time and on the you know, the income that you want and you know, would you agree with that?
I think so?
And also where you want to buy, because yeah, if there's a couple, yeah you can get a utilize one hundred thousand of of that. But if you looking to buy in Sydney, one hundred thousands unfortunately doesn't get you.
Fry it it gets to you, not even a parking spot, Adam coming back to you when it comes you know, is this something that mortgage brokers do? You know we've mentioned about talking to your accountant, talking to your superannuation provide obviously to endo your family about you know, what your goals are. Do you also need to let the mortgage broker that, Okay, my deposit I'm working on is going to be funded through you know.
We really need to be aware of it because the process and one of the rules for withdrawing the money is that you should do that for the determination before signing a properly contract.
So you've got to be very organizic.
Line you do.
If you don't sign a contract, I don't know if we can go back in again. I'm not too sure.
Gosh, that would be hard because whatd have had something happens and you the property fell through. It does occasionally happen.
Weile you go to the auction and you didn't write the winning better.
Yeah, and then you just keep on getting out bit all the time over the next twelve months. You know that. I mean, and I guess this is one of the downsides all this, which you know, hopefully with this new legislation coming in September. Allows, that's right, those twenty four Okay, well there, we've got twenty four months. But still I mean, I mean, I know people who have been looking for you, yeah, yeah.
To get there because once it's out, if you don't buy, then I assume they would then that triggers they tack extra tacks in twenty four months or something.
Gosh, you, I mean, you have to have all your ducks lined up.
You've got twelve months from the determination date for withdrawing it. For the purpose of signing a contract and paying a deposit, you've got twelve months to use it. Obviously, we understand that, particularly if you go into auctions, success rights and bidding is relatively low. So you've got twelve months and they can give you an extension up to twenty four months, okay, which you don't need to apply, so I six, well up, no twenty four ok okay.
Well, I mean that starts to be a lot more relaship. But still it's something you want to know because if it means okay, you're going to miss out on a property by five thousand dollars and you're going to get back to square one and you are cutting it fine with those deadlines, it's good to know these things. And again, I guess that's why you've you've got to speak to
a mortgage broker. You've got to read the fine print, you've got to be organized, you've got to know your numbers, your limits as to how you know what you're getting back your taxes, and obviously how much you can afford to borrow. Do you have any success stories that you can share with us as to people who have been able to actually finally get a property by using.
This success stor it? Look, this example was just what I think is probably fortunate in time and to circumstances, but customers of mine that recently used it using the super Saver scheme, not well, we're able to save and avoid mortgage insurance. And I think the mortgage insurance it was it just got over the line by a few
thousand dollars. So I'd put that down towards the returns that they were getting within the super fund as being you know, the returns were then super fund were more than what they get outside of it, and that small difference. Probably want to help them avoid mortgage insurance.
In the end.
And how much whether that mortgage insurance costs them if they didn't have this intended that's huge. That's a that's a great win. And you know what, I really believe you make your own luck. You know, it's that's this is why you need to be informed and you need to know about this as an option if you're trying to eat it within the.
Door preparation research.
Yeah, and you know, you know it is fifteen thousand dollars a year. It is a lot of money to take out of your cash. But if you're you know, the discipline of it is, you can't spend it. You can't see something online and just get distracted and go blow it on a new television or a handbag or you know, a trip to Europe. It's in there. They're holding it and taking away that temptation for you, which for a lot of people is needed.
That's right, But also that fifteen thousand, it's a deductible contribution, so you're not you're not impacting your cash blow by fifteen thousand exactly, depending on your marginal rate. You know, if your top marginal or that might only impact your cash flow by seven and a half to eight nine thousand, So it's not as bad as one would first think making that extra conjolution.
Richard, what would you say from a financial planner's point of view with this? You know, you know people to think about. Obviously, we've touched on the importance of making sure that that money's invested with a five year investment in time horizon. So you wouldn't recommend someone who's doing this put all their money into the shares and property allocation within their superannuation. You know, talked about those conservative asset classes as potentially being wiser because we do need
to pull that money out. What other things do you see as important to consider as part of this.
First of all, making sure you can comfortably make that contribution without it impacting your lifestyle and you've touched on you want to make sure that you're not in the too aggressive fund for those moneys because most super funds, you'll be able to allocate that money going into a specific fund. It doesn't have to go into your default
mix probably be seventy percent allocation to equity markets. So I think that's the main thing you want to make sure of, is that say you that that money is not going to impact or the lack of that money going into super is not going to be impacting your cash flavor. And then yesb that you've got it invested in an an appropriate asset for the timeframe you've got because five years isn't a great deal of time in an investment lifetime.
And the other thing I have to say is, you know, if anyone that wants to do this, don't just look at this as purely your deposit, like try and save separately elsewhere if you can, because you do need to have that discipline. You do need to learn how to
stick to a budget. You do need to learn how you know to say no to buying something or splurging on something because you've got this big responsibility and this big goal that you're working towards, So don't just rely these or deposit being purely bus have a separate savings account nickname it, you know, my deposit money, and try
if you can. We know, as you said, within your budget, you know, have a regular saving plan towards that, so that you do have a cash too as well as this this superannuation save scheme money as well, so you can find the two and potentially you know again no save on ortgage insurances or potentially not need a guarantalk because you've got a decent sized deposit building up there, You're only going to look more desirable to the bank, would you correct?
Absolutely? And because if we're talking about Sydney market, you and your partner contribute fifty thousand each to the super Savior scheme. You take me out one hundred plus earnings, it's ten percent deposit and a mean or the property. Yeah, so that you think got mortgage insurance if you don't have more than ten percent stamp duty so you need a lot more continue saving. Don't just use this as one now is it will supplement it?
Correcte? Yeah? Really wise advice and Richard, I want to not end with you if that's Okay, if someone has gotten too a great habit, because five years is a long time to create a habit, you know, not even missed that money. And you know, say someone uses this, they have their regular savings plan for their deposit and they've got you know, their super Sabers skime money as well. And the reason why I say this is just so
much of a financial being is habit. You know, you think, you know when you don't think about you just do it. Once you've got your deposit, you know, you've bought your property, you've taken that money out. You know, you're cooking with gas, you're you're foot in the door of the property, and you're paying your mortgage off. What are your thoughts as to what to do with that fifteen thousand that you've previously been contributing. Obviously, there's a thousand ways to skin
a cat. You know, should they should one consider putting that as an extra payment towards their mortgage or should they maybe if they're comfortable that rebuild their superannuation because they like seeing a nice healthy balance there and knowing that that's the retirement money. What are your thoughts under the obviously the banner of general advice like, because I think you want to keep riding off great habits. You don't want to just let them evaporate. The lifestyle creep kick in.
No, indeed, there is an argument can continue paying into super that fifteen thousand? But Eda, I'm a big fan of paying down the mortgage?
Yeah, after tax saving?
Yeah, yeah, of course, because you know interest rates now, what's six six and a half percent depending on your mortgage, So you're getting a tax free risk free return of six percent six and a half percent by paying down your mortgage, So you have interest rates for a lot where they were three years ago. Then maybe you could argue putting the money into super is IS would be
more beneficial because you'll get a much better return. But you know, an after tax risk free return of six six and a half percent at the moment is hard to say no Toedly.
Yeah, I agree, And look, you know there's no it's not we don't live in a black and white world. Sometimes you know, you might go, Okay, well, for the first two years, I'm going to make great headwinds with my mortgage because that's when we can have the biggest and best impact and save obviously interest as well as time. But then you know, in two three years time, you might go, Okay, well all right, I'm going to now
balance it. I'm going to look at some sacris salary sacrificing that was in similar alignment to you know, the Super Savior, same plan that I had go going on, as well as maintaining you know, some extra payments as well. So again, this is why everyone needs to get quality advice. They need to not just get their advice off social media.
They need to get advice off sitting down and talking to someone and showing them the numbers, crunching them and talking about all the pros and cons and also brainstorming a variety of other different ideas like dep recycling or having a regular investment plan or you know, there's so many different things that we need to all think about and consider. So Richard and Adam, thank you so much
for talking about it. And if anyone has any questions and we'd like to, you know, learn more about getting you to help them with their mortgage applications in buying a first home. Where's the best place to contact you?
Best for me is email Adam at Bluelanton dot com dot au.
And Richard, you're a financial planner like myself. We've worked together, you know, many many years ago. For people who want to talk about their superannuation and talk about Okay, well I use the super scheme or you know, I'm aware of my superannuation being low and you know I'm interested in hearing about how I can potentially save tax how do they get contact.
With you same way? Emails Best Richard at Blueland dot com dot you.
So for everyone, Thank you so much for listening today's episode on the first home owner Supert's Saber scheme. This is something that might be a glimmer of hope for people who are passionate about having a home of their own, something they can stand in front of, look at, feel, touch and see and actually make it part of their investment portfolio over the long run, where their first home is just the entrance their passage in creating real, authentic,
long term, sustainable financial freedom and independence. For anyone that ever has any questions or has any podcast topic requests, please make sure you send them directly to me on Instagram at sugar Mama Tibi, and in the meantime, please feel free to share this particular episode with any of your family or friends that are really trying to get into the property market, as this may be the perfect solution and the glimmer of the hope that they may
need right now. Thank you everyone for listening. In the meantime, keep that financial fire burning bright. This is Sugarmomma's I