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Salary Sacrifice: Does It Really Make a Difference for First Home Buyers?

Salary sacrifice arrangements are voluntary contributions to your superannuation made in excess of the compulsory 9.5%. Individuals can withdraw funds earned from salary sacrifices, provided they meet certain conditions. One of these is the use of the funds to put down a deposit for a first home, called the First Home Super Saver Scheme (FHSSS).

Typically, Australians save up for a first home deposit through bank savings. These days, deposits are usually around 20%, which is a steep price if you’re looking at a medium-class house worth upwards of $500,000. Saving up for the deposit can take many years.

The FHSSS allows an individual to make an excess contribution towards their superannuation for the purpose of buying their first home. For example, a worker who earns $60,000 annually and makes a voluntary contribution of $10,000 under the FHSSS for three years will have $6000 more than if they went the bank savings route.

Six thousand extra dollars may sound like a big amount, but according to Ash Marton, founder of Ash Marton Realty, $6000 will not really make a dent in your purchasing power when it comes to buying property. With today’s real estate prices increasing by as much as $2300 a week in Sydney and almost $2000 in Melbourne, the FHSSS might not affect home ownership rates as much as the government intends it to.

Taking advantage of extra funds generated by salary sacrifice arrangements under the FHSSS is well and good, as $6000 is a decent amount of money. Still, Marton recommends a more comprehensive approach to saving up for your first home, which includes looking at the bigger perspective.

  1. Having a personal budget is essential. Analyse your daily expenses and your daily needs, and make sure you aren’t living above your means. If you need to sacrifice a bit by cutting back on some luxuries or supplementing your income with side hustles, then do so. Determine your priorities so you have a better understanding of what you are aiming for in the future.
  2. Small contributions over a long period of time can go far. You don’t need to be earning millions to be able to save money. Once you get on a budget, you can set aside small amounts for your savings. Over the course of several years, this can grow to a decent amount.
  3. Research and educate yourself on financial issues. Keep yourself updated with current housing prices, so you can make a good budget plan for your home savings. Learn about investments—how to grow your money through trading. Take a look at the government’s efforts to help first home buyers, such as the FHSSS and how you can utilise it for your benefit.

For Marton, the bottom line is that salary sacrifice per se will not give you enough for a first home deposit, but it can be a good supplement for your home savings.