From the 1 July 2008 first home buyers will be able to tax effectively save a deposit for their first home through a combination of a Government contribution and low taxes.
Announced in February 2008 by the Federal Government, the scheme allows individuals to deposit up to $10,000 per annum into an account and receive a co contribution from the government of between 15% and 30% of $5,000 depending on the your marginal tax bracket.
That means if you put $5,000 into your account and earn less than $80,000 p.a. during the 2008/2009 financial year, the government will boost your savings with $750 or $1,500 if you are on the highest marginal tax bracket of 45 cents in the dollar.
If you are married both couples can take advantage of the scheme so $10,000 can quickly become $11,500.
The scheme will operate in a similar way to the superannuation co contribution.
The scheme is a great idea but be aware of one particular withdrawal rule. Typically, amounts will only be allowed to be withdrawn where contributions of at least $1,000 have been made in each of at least four financial years. If you put $10,000 into the fund in year one and then decide to purchase your first home in year two it is unclear whether you will be able to use the $10,000 deposited in the first year. You may have to wait 3 years to do so.
Some of the rules may change as the scheme is currently undergoing a consultation process. However, this strategy sp could be a great way for you to achieve your home ownership goal. Watch out for updates on this scheme in future newsletters. Or please call to Cornerstonewealth to discuss incorporating this into your financial strategy.
This newsletter does not take into account the personal objectives, financial situation or needs of any person. You should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and obtain professional financial advice prior to making any decision.