Find and compare super funds for use as home loans

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Learn more about superannuation

Buying a home is – for many of us – the biggest purchase we will ever make in our lifetimes. For many Australians, getting together the money for the deposit on a home loan is a lengthy process, full of sacrifice and uncertainty.

You may have wondered on more than one occasion if it is possible to use your superannuation fund to pay for a home loan, especially if you are nearing retirement age. After all, a superannuation fund generally functions similarly to a savings account, accumulating money over time and keeping your wealth secure.

The short answer is yes, you can use your superannuation to pay for a home loan, but not in the way you might think. Here’s what you need to know about superannuation home loans:

Can I use my current superannuation balance to fund a home loan?

If you have not yet reached your reservation age and retired, the answer here is an almost definite “no”. Superannuation in Australia is subject to strict regulations – including when and how funds can be withdrawn.

Before you retire, you can only withdraw funds from your superannuation in emergency circumstances, such as if you’re facing terminal illness, permanent incapacitation, or severe financial hardship.

If you have an existing home loan, you may be able to make a withdrawal from your super to make a mortgage repayment to avoid losing your house, as this falls under the banner of compassionate grounds, which also covers medical and funeral expenses.

After you’ve retired, you may be able to use money from your super fund to put a deposit on a home loan. It’s often more difficult for retirees to successfully apply for a mortgage, though some banks and other lenders specialise in loans for mature Australians.

So how can I use my superannuation fund to save for a mortgage deposit?

As of July 2017, first home buyers can now start making contributions to their super funds to save towards a home loan.

This is called the First Home Super Saver Scheme (FHSSS) and it allows voluntary contributions to be made by individuals to their super funds, which can be withdrawn as of 1 July 2018.

In addition to offering a secure way to save a deposit where you won’t be tempted to spend your saved money, the main appeal of this scheme is the tax offset applied to these contributions. There is a significant reduction in the amount of tax payable on super contributions when you make a withdrawal, potentially making it easier and faster for Australians to save for a home loan using the First Home super scheme.

Super funds with home loan offers

As well as securing your money for retirement, many super funds offer a range of extra features and benefits, which may appeal to selected Australian households.

Some Australian super funds are affiliated with home loan providers, including banks and non-bank lenders. Members of these super funds may be able to enjoy special home loan offers, such as discounted interest rates or waived fees on their mortgage. While you won’t be able to use the savings in your super fund to pay for your mortgage, joining one of these funds may allow you to enjoy a better home loan deal than you’d otherwise be eligible for, and add some flexibility to your household budget.

A mortgage and superannuation are two of the most significant investments than many Australians may make in their lifetimes, so it’s important to compare your options and carefully consider the costs and benefits before selecting the best super fund or home loan for you.

Buying property through a self-managed super fund

One of the few circumstances in which you can use your superannuation fund to buy property is if you have a self-managed super fund, or SMSF. These super funds require significantly more time and effort to manage, as you are responsible for controlling your retirement money, including how it’s invested.

Unlike a regular super fund, you can use your SMSF to fund a home loan for residential or commercial property, provided you comply with the following rules:

  • You can only purchase an investment property, solely for providing retirement benefits to fund members (that’s you)
  • It can’t be lived in or rented by a fund member (that’s you) or any fund members’ related parties (that's your family and friends)
  • Returns from the investment property are to go back into the SMSF as part of your retirement savings.

Before you commit to a self-managed super fund, it’s important to compare your available options, and read up on SMSF rules at the Australian Tax Office (ATO). Consider contacting a qualified financial adviser, who can help you work out if a self-managed fund may be the best super fund option for you to get a home loan.

Should I use my superannuation to fund a home loan?

Using superannuation schemes or benefits is certainly one way to fund your home loan. For first home buyers, the First Home Super Saver Scheme could be a great way to save for your home loan faster. Like all schemes, it is subject to regulations and caps on the amount you can save or withdraw, so make sure to keep abreast of the current regulations.

Self-Managed Super Fund property loans are more complicated than many other mortgages, but so too are self-managed super funds themselves. Make sure to do your research on eligibility, fees and regulations for this type of home loan and super fund.

Frequently asked questions

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

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SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

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Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

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When is superannuation payable?

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

What is the superannuation rate?

The superannuation rate, or guarantee rate, is the percentage of your salary that your employer must pay into your superannuation fund. The superannuation guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Is superannuation included in taxable income?

Superannuation is not included when calculating your income tax. So if you have a salary of $50,000, your assessable income would be $50,000, not $50,000 plus superannuation.

That said, superannuation itself is taxed. It is generally taxed at 15 per cent, although if you earn less than $37,000, you will be reimbursed up to $500 of the tax you paid.

Am I entitled to superannuation if I'm not an Australian citizen?

Yes, permanent and temporary residents are entitled to superannuation.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

What are government co-contributions?

A government co-contribution is a bonus payment from the federal government into your superannuation account – but it comes with conditions. First, the government will only make a co-contribution if you make a personal contribution. Second, the government will only contribute a maximum of $500. Third, the government will only make co-contributions for people on low and medium incomes. The Australian Taxation Office will calculation whether you’re entitled to a government co-contribution when you lodge your tax return. The size of any co-contribution depends on the size of your personal contribution and income.

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

What is lost superannuation?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.

Who can open a superannuation account?

Superannuation accounts can be opened by Australians, permanent residents and temporary residents. You’re automatically entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

How much superannuation do I need?

According to the Association of Superannuation Funds of Australia (ASFA), here is how much you would be able to spend per week during retirement:

Lifestyle Singles Couples
Modest $465 $668
Comfortable $837 $1,150

Here is the superannuation balance you would need to fund that level of spending:

Lifestyle Singles Couples
Modest $50,000 $35,000
Comfortable $545,000 $640,000

These figures come from the March 2017 edition of the ASFA Retirement Standard.

The reason people on modest lifestyles need so much less money is because they qualify for a far bigger age pension.

Here is how ASFA defines retirement lifestyles:

Category Comfortable Modest Age pension
Holidays One annual holiday in Australia One or two short breaks in Australia near where you live Shorter breaks or day trips in your own city
Eating out Regularly eat out at restaurants. Good range and quality of food Infrequently eat out at restaurants. Cheaper and less food Only club special meals or inexpensive takeaway
Car Owning a reasonable car Owning an older, less reliable car No car – or, if you do, a struggle to afford the upkeep
Alcohol Bottled wine Casked wine Homebrew beer or no alcohol
Clothing Good clothes Reasonable clothes Basic clothes
Hair Regular haircuts at a good hairdresser Regular haircuts at a basic salon Less frequent haircuts or getting a friend to do it
Leisure A range of regular leisure activities One paid leisure activity, infrequently Free or low-cost leisure activities
Electronics A range of electronic equipment Not much scope to run an air conditioner Less heating in winter
Maintenance Replace kitchen and bathroom over 20 years No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom No budget to fix home problems like a leaky roof
Insurance Private health insurance Private health insurance No private health insurance

Am I entitled to superannuation if I'm a casual employee?

As a casual employee, you’re entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

How do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

What are the risks and challenges of an SMSF?

  • SMSFs have high set-up and running costs
  • They come with complicated compliance obligations
  • It takes a lot of time to research investment options
  • It can be difficult to make such big financial decisions

How do I change my superannuation fund?

Changing superannuation funds is a common and straightforward process. You can do it through your MyGov account or by filling out a rollover form and sending it to your new fund. You’ll also have to provide proof of identity.

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.