The First Home Super Saver (FHSS) scheme was introduced in the 2017-18 Federal Budget to reduce pressure on housing affordability. Here’s how it might help you save for your first home.
How it works
Under the FHSS scheme, you can make voluntary contributions of up to $15,000 per year or $30,000 in total into your super to save for your first home. You can then withdraw these contributions, plus any earnings they make while in your super account, to contribute to your first home deposit.
What’s the advantage?
The FHSS scheme lets you save more for your deposit, faster. It does this by taking advantage of the concessional tax treatment and generally higher rate of earnings within super.
Pre-tax contributions into super (such as salary sacrifice) are taxed at 15 per cent, instead of your standard marginal rate, which is between 19 and 37 per cent depending on your income. Earnings generated by money in your super account are also taxed at 15 per cent.
This means you get more bang for your buck when saving in super when compared to the average savings account.
When withdrawing your first home savings, the withdrawal is taxed at your marginal tax rate minus 30 per cent. For most people this means you will pay little or no tax when you withdraw (however higher-income earners on high marginal rates will pay some tax).
Are there any drawbacks?
Your contributions must be voluntary. Superannuation Guarantee contributions made by your employer don’t count and must remain preserved until you retire.
You can only use the scheme to buy a property you are currently living in or intend to live in as soon as practicable. You must also live in the property for at least six of the first 12 months you own it (counted from when you move in).
FHSS scheme contributions also count towards your super contributions caps. As at June 2018, the maximum amount of pre-tax money you can put into super is $25,000.This includes your employer’s contributions. If your FHSS scheme contributions push you above this limit, you will pay more tax.
Also, some types of voluntary contributions can’t be withdrawn under the scheme, such as spousal contributions and third-party contributions.
How do I start?
Just start making voluntary contributions into your super! You can start at any age and you don’t need to tell us that the contributions you’re making are for the FHSS scheme.
How much can I withdraw?
When you have saved enough for your deposit, you can withdraw your eligible voluntary contributions (within yearly and total limits), plus any earnings on those contributions. This includes:
100% of eligible non-concessional contributions
85% of eligible concessional contributions
any associated earnings calculated on these contributions (using a deemed rate of return)
How do I withdraw?
The FHSS scheme is administered by the Australian Taxation Office (ATO). To withdraw your FHSS scheme amounts, you need to apply to the ATO for a FHSS determination (which calculates exactly how much you can withdraw) and release.
You must also:
be aged 18 or older;
have never previously owned property in Australia; and
have never withdrawn money from your super for the FHSS scheme.
Applications must be lodged online using your myGov account before you enter into a contract for purchase or construction.
For more information about the FHSS scheme visit ato.gov.au