Fortunately, saving for a deposit on your first home just got a little easier with the Federal Government's new First Home Super Saver Scheme. From 1 July 2017, first home buyers can make voluntary contributions to their super fund, which can be withdrawn and used as part of a deposit after 1 July 2018.
The average price of houses are increasing, with Sydney's median price reportedly above $1 million. How long would it take you to save a 20% or even a 10% deposit? For some people it would probably take a couple of decades, at least. But with the government's new scheme, the Australian dream could be within reach.
You can now make voluntary contributions to your super fund up to $15,000 per year and $30,000 in total, which can be withdrawn and used as part of the deposit for you first house. These contributions will be taxed at a lower rate of 15%, as opposed to your marginal tax rate, which can be up to 45% depending on your income.
Many Australians will be able to salary sacrifice these contributions, which means the contribution will be made from your income pre-tax. According to the First Home Super Saver Scheme - Estimator, if you have a taxable income of $65,000 and salary sacrifice $5,000 annually, your take-home annual pay will only reduce by $3,200 and you'll have estimated $27,754 available for a deposit on your first home after six years.
If you put $5,000 of your income into a savings account with an interest rate of 3.05% per annum over 6 years, assuming you continue to make annual contributions of $5,000 to the account, your final balance will be $32,382.68, with $2,382.68 in interest on top of the $30,000 saved.
Alternatively, you could put your money into a term deposit. But remember, you'll be charged your usual marginal tax rate on any money you put into either a savings account or a term deposit. This means your annual take-home pay will be lower than if you choose to salary sacrifice these contributions. Check out the ATO website for more information.
When it comes to saving for your first home, you have to find a solution that will work for you. You might appreciate the ability to salary sacrifice, as it takes away from the temptation to spend your income. Instead, the money goes directly into your super fund before you're paid, so you ability to save isn't dependent on your impulsive control.
Instead, you might prefer to have control over where your money goes once it's in your hands (or bank account). This gives you the option to deposit your savings into an account of your choosing.
If you're worried about never being able to buy the house you want, there are other ways of entering the property market. It's about being resourceful with your time and money. Make sure you compare all your options and compare which ones suit your financial situation best.
Our team at iSelect have partnered with Lendi*, so we can help you compare a range of different providers on the market. Use our online tool to compare home loans, or give Lendi a call on 1300 186 260 (08:30-18:30).
Private health insurance provides financial cover for all or part of the cost of various health related treatments and services. Depending on the policy, it can provide cover for treatment as a private patient in a public or private hospital, allowing you to choose both your doctor and hospital, at a time which suits you. Additionally, it can provide cover for health services not covered by Medicare (such as physiotherapy, optical, and dental). It functions similarly to other types of insurance, such as home and contents or car insurance, although rather than being risk based, it’s community based.
This means that everyone is eligible to receive the same base price for the same policy from any single provider, rather than being rated on their individual health concerns. There are two main types of policies you can take out: Hospital Cover and Extras Cover. These can be purchased separately, or combined into a single policy with your health provider. One of the biggest benefits of health insurance is choice and flexibility. For example, as a private patient you’re given the choice of doctor, the choice of agreement hospital or clinic, and you have flexibility over the time of your appointments. In comparison, when you’re treated as a patient in the public system, the appointment times, doctors, and hospitals are typically inflexible, determined by your location and your health concern. Health insurance can also help you avoid long waiting lists for treatments (provided you’ve served the necessary waiting periods) which exist in the public system.
Private health insurance cover is divided into two categories: hospital cover and general treatment cover, also known as ‘extras’ cover. These covers can be purchased separately or as combined policies by most health funds, depending on your individual requirements. In some states, a third category known as ambulance cover is also available, although this is sometimes included in hospital cover or extras depending on your policy. As private health insurance is not risk rated, providers can’t refuse to insure any eligible person. They must also charge everyone the same base premium for the same level of cover. Therefore, to help mitigate some of the risk for health fund providers, some treatments may incur a waiting period. This is typically served when you first purchase private health insurance, or when you upgrade your policy to include services and treatments not previously covered.
The government sets the maximum waiting periods that health funds can impose for hospital treatment, which are:
12 months for pre-existing conditions
12 months for obstetrics and IVF
2 months for psychiatric care, rehabilitation or palliative care, even for a pre-existing condition
2 months in all other circumstances
For extras insurance, waiting periods are determined by your individual health fund provider, and the length can vary depending on the treatment and your level of cover. If you’ve already served a waiting period for a specific service and switch providers without cancelling your cover in between, you generally don’t have to serve a new period unless you are increasing your benefits, although it’s best to verify this with your new provider. To receive benefits, you must have a policy that covers the treatment you’re receiving and have served your waiting period. Some clinics and hospitals will be able to automatically apply your benefit by scanning your health fund membership card during the payment transaction. In some cases, you may need to make the benefit claim after paying up front, which you can do by contacting your health fund provider directly. How much you pay, ultimately depends upon your policy and level of cover.
Private health insurance can cover a range of health treatments depending on your individual policy and provider. It can also depend upon whether you’re claiming a benefit for hospital or extras cover. On 1st April 2019, the Australian Government made changes to how hospital insurance was classified to help policy holders better understand their cover. These classifications are:
Excess charges in health insurance work similar to other forms of insurance. For example, some types of car insurance policies give you the option to increase the cost of your excess in order to reduce the overall cost of your premium. The same can be said for health insurance hospital cover. To further clarify, when you attend hospital, Medicare will cover 75% of the Medicare Benefits Schedule (MBS) fee for the treatment you’re receiving. Provided you have the appropriate private health insurance policy, your health fund will cover the remaining 25%. While the Australian Government determines the fees for the MBS, they do not set the costs doctors choose to charge for their services, which can lead to additional expenses.
Depending on the extent of your hospital stay, further charges may also apply to cover the costs of drugs and pharmaceuticals, dressings and diagnostic tests. To avoid a large bill for private health patients, some health fund providers offer what is known as ‘gap cover’. This option means the additional expenses may also be included in your benefit from your health fund if the treating doctor wishes to participate. In order to avoid a high premium, you can opt to select an excess to help keep your costs down. Depending on your policy, you may be required to pay an excess every time you go to hospital, or just once per year.
The private health insurance rebate is provided by the Australian Government to help cover the cost of your premiums for hospital, extras, and ambulance cover policies. It’s offered in order to encourage Australians to sign up for private health insurance and subsequently lessen the load on the public healthcare system. For this reason, it’s not applicable to overseas visitors cover. How much you receive as a rebate depends upon your income. If you have a higher income, your rebate entitlement may be reduced, or you may not be entitled to any rebate at all.
Couples (including de facto) are subject to a family-based income. The rebate percentage is adjusted on 1 April each year, although the income thresholds are currently indexed and will remain the same to 30 June 2021. If you’re eligible to receive the rebate, there are two ways you can claim. The first is as a premium reduction through your health fund provider, which means you pay less upfront. If you choose this method, it’s your responsibility to nominate the appropriate rebate tier with your provider to avoid a tax liability. Alternatively, you can pay more upfront on your premium and receive the rebate as a tax offset when lodging your annual tax return.