The First Home Super Saver Scheme (FHSSS) explained
Buying your first home is an exciting milestone, but saving for that initial deposit is a daunting task. To support aspiring homeowners, the Australian government introduced the First Home Super Saver Scheme (FHSSS), a program that helps individuals save for a house deposit by making use of their superannuation funds. Below we’ll explore the FHSSS in detail, outlining how it works, its benefits, and how you can take advantage of this scheme to realize your dream of owning a home.
Understanding the First Home Super Saver Scheme
The First Home Super Saver Scheme, often referred to as the FHSSS or FHSS scheme, is designed to assist first-time buyers save for a house deposit by allowing voluntary contributions to their superannuation fund be withdrawn for the purposes of buying a first home. The scheme allows eligible individuals to withdraw voluntary contributions, along with associated earnings.
To participate in the FHSSS scheme, you must meet certain criteria. You must be at least 18 years old, have not previously owned a property in Australia, and intend to live in the property you purchase. Additionally, you must have made voluntary contributions to your superannuation account i.e. additional contributions above what your employer has contributed.
Benefits of the First Home Super Saver Scheme
Save tax
The FHSSS offers several advantages to aspiring homeowners. Firstly, by utilizing the pre-tax income to contribute to your super, you can benefit from potential tax savings. These contributions are taxed at only 15%, compared to your marginal tax rate, which will likely be higher. This means more money can be allocated towards your home deposit. For example: an individual that earns $70,000 has a marginal tax rate of 34.5% including the Medicare levy and the contributions tax is just 15%. So If this individual makes a $10,000 concessional contribution to their super they don’t pay the 34.5% or $3,450 income tax and instead just pay the 15% or $1,500 contributions tax thus saving $1,950 in tax.
Super earnings grow your deposit
Another benefit of the FHSSS is that it allows you to save more quickly by accessing the earnings on your contributions. While your superannuation fund typically generates returns, the FHSSS ensures that you can withdraw these earnings along with your contributions. This boosts your overall savings, making it easier to reach your deposit goal.
Forced Savings
Additionally, it becomes a lot easier to save if you never receive the funds in your spending account to begin with. If you ask your employer to salary sacrifice extra money into your super that savings is guaranteed because you wont be able to spend it even if you wanted to.
Eligible Contributions for the First Home Super Saver Scheme:
Included Contributions:
Voluntary concessional (before-tax) contributions.
Voluntary non-concessional (after-tax) contributions.
Concessional contributions include salary sacrifice and contributions from personal savings where a tax deduction is claimed.
Non-concessional contributions are made from personal savings where no tax deduction is claimed.
Excluded Contributions:
- Mandated employer contributions.
- Government co-contributions.
- Spouse contributions.
Contributions limits
- $15,000 per year per person.
- $50,000 across all years per person.
Using Superannuation for Your House Deposit
Once you are ready to purchase your first home, you can apply to the Australian Taxation Office (ATO) to release your FHSSS funds. The ATO will determine the exact amount available to you, taking into account your eligible contributions and associated earnings.
After the release of funds, you have a 12-month period to sign a contract to buy or construct your home. This timeline ensures that you use the FHSSS for its intended purpose. If you do not meet this requirement, the funds will be returned to your superannuation account.
How to Apply for the First Home Super Saver Scheme (FHSSS) Withdrawal
Once you are ready to apply for the withdrawal of your FHSSS funds, the process is fairly straightforward. Follow these steps to apply for the FHSSS withdrawal:
Request a FHSSS determination: Log onto the ATO section of myGov, go to the super dropdown menu, slect manage and First Home Saver. There you will find details of your eligible contributions and associated earnings.
Request the release of your funds: If approved, the ATO will issue a release authority to your superannuation fund requesting they send the funds to the ATO. The ATO will then withold the appropriate amount of tax and offset the remaining amount against any commonwealth debt before releasing the funds to you.
It’s important to ensure that you comply with the specified timelines and requirements outlined by the ATO throughout the application and withdrawal process. Consulting with a financial advisor or reaching out to the ATO directly can provide further guidance and clarification on the application process.
FAQ's
No, the FHSSS is specifically designed to assist individuals in purchasing their first home. The funds withdrawn under this scheme must be used to acquire a property that will be your principal place of residence.
Yes, the FHSSS focuses on property ownership in Australia. If you have previously owned a property overseas, it does not disqualify you from participating in the scheme as long as you meet the other eligibility criteria.
If you don’t sign a contract to purchase or construct a home within the required 12-month period, the funds will need to be either recontributed to your superannuation account or subject to additional tax penalties.
Yes, you can potentially combine the FHSSS with other government schemes or grants. For example, you may be eligible for the First Home Owner Grant or stamp duty concessions in your state or territory, which can further support your homebuying journey.
There are generally no restrictions on the type of property you can purchase using FHSSS funds. You can use the funds for houses, townhouses, apartments, or land to build a home, as long as it meets the criteria of being your principal place of residence.
Yes, you can continue to contribute to your superannuation account even after applying for the FHSSS withdrawal. However, any additional contributions made will not be eligible for withdrawal under the FHSSS and will be subject to the regular superannuation rules and regulations.
It’s important to note that the FHSSS has specific rules and requirements that are subject to change. Therefore, it is always recommended to consult with a financial advisor or refer to the Australian Taxation Office (ATO) website for the most up-to-date information and guidance regarding the scheme.