Strategies

Can You Use Your Super as a Deposit?

June 18, 2020
Invex
Invex Team

You have a superannuation fund with a history of payments. You need a deposit for a home. So, it makes sense to ask: Can you use your super fund as a deposit in Australia? The straight answer is: No, you cannot directly use your super fund as a deposit in Australia.

However, if we take a closer look at the situation, we can see that a super does give you options when purchasing a home, even if you cannot use the fund to provide a deposit.

Let’s take a look at the two main options here.

Using The First Home Super Saver Scheme

Since 2017, the federal government has been working to make life that little bit easier for first time home buyers. To support this, they launched the First Home Super Saver Scheme, which came into effect in July of 2018, and applies to any voluntary super contributions made from July 2017 onwards.

Basically, anyone seeking to buy a home can access up to $15,000 from these voluntary super contributions each year capped at $30,000 per person (two years of drawing $15,000 from each fund). 

This means that a couple could feasibly draw upon $60,000 after two years – something that represents a handy springboard for those seeking to get on the property ladder.

There are also tax and interest implications. 

Those who use the First Home Super Saver Scheme benefit from a lower rate of tax on the funds they draw while gaining better interest than they would if they were putting money away in a savings account.

However, only eligible home buyers will be able to benefit from this scheme. This means:

  • Home buyers are at least 18 years of age.
  • This will be the first home in Australia for the buyer.
  • The buyer has never purchased an investment property in Australia.
  • This is the first time that the buyer has released funds under the scheme.
  • The buyer will move into the property as soon as possible.
  • The buyer plans to live in the property for six months out of the first 12, at the least.

Using a Self Managed Super Fund

It is possible to use your Self Managed Super Fund (or SMSF) to purchase a property - but only as an investment. You may be able to use some of the money from the fund to put up as a deposit and therefore secure a loan. However, you will not be allowed to move into this property.

The aim is to give you a capital asset that you can use to take advantage of further down the line, bolstering your savings in retirement. There is no loophole here, and you cannot use this method to buy a home for yourself to live in.

Conclusion

It may seem frustrating that you have saved money in your super and yet you cannot use it to secure a loan on a property you want to purchase. However, there are options that can allow you to take some advantage of your superannuation savings towards a property, though in limited circumstances.

Looking for ways to purchase a property without a deposit? Read our guide here.

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