Let’s be real for a minute – saving for a house is tough. It can take ages to raise the money for a deposit, even if you’re consistent with your savings plan. Luckily, now there’s a way to save faster. With the Government’s new First Home Super Saver Scheme (FHSSS), you may be able to help save for a home deposit through your super account. Check out the answers to some of the frequently asked questions about the FHSSS below.
What is it?
The FHSSS is a benefit created by the Australian Government to help first home buyers save for a home deposit.
Once you’re ready to buy, you apply to the Australian Taxation Office (ATO) to withdraw the amount to put towards your home loan. You can withdraw up to a maximum of $15,000 from any one financial year and $30,000 in total across all years of the eligible contributions you make – this includes a deemed earnings rate on your contributions calculated by the ATO (rather than the actual earnings).
Then it’s time to enter the property market!
Once you withdraw, you have 12 months to sign the contract to purchase or build a home, and you’ll need to occupy it for at least six months of the first year after the purchase or when it is practicable to do so. If not, you might have to apply for an extension from the ATO, recontribute the amount withdrawn back to your super or you may be liable for further tax.
How do the contributions work?
There’s no need to tell your super provider that you’re contributing for the FHSSS. The scheme counts eligible funds you add to your super account proactively, outside the compulsory ones your employer makes. Check out an overview of the different types of contributions you can make here. Note that contributions to a defined benefit fund or constitutionally protected fund are not eligible.
Up to $15,000 of voluntary contributions per financial year can count towards the $30,000 total you can withdraw.
What’s the benefit?
On the surface, it sounds a lot like a glorified savings account. In a way it kind of is, and you might pay less tax on the money you contribute.
Pre-tax super contributions, like salary sacrifice and personal contribution where a tax deduction is claimed, are taxed at the fund’s rate of 15%, rather than at your marginal tax rate. Not only that, the contributions you make could achieve extra earnings through the investments your super fund offers.
Saving in your super could help you put away thousands of extra dollars for your first deposit.
You can check out how much you’ll save by entering in your income and super contributions in the First Home Super Saver Scheme estimator.
When does it start?
The changes apply to voluntary contributions made into super on, or after, 1 July 2017. You can withdraw funds from 1 July 2018 onwards.
Who can claim it?
To withdraw contributions under the FHSSS, applicants must:
- Be aged 18 years or older
- Have never owned property in Australia
- Not use the FHSS amounts to purchase:
- Any premises not capable of being occupied as a residence
- a houseboat
- a motor home
- vacant land
- Have not previously used the FHSSS benefit
The ATO is responsible for determining what you can withdraw and issuing the release authority to your super fund. Your super fund will then send the amounts to the ATO who will deduct the appropriate amount of tax and send the balance to you. To apply you’ll need to complete the form that will be available on the ATO website from 1 July 2018.
Are there any limits to the contributions I can make?
As we mentioned earlier, a total of $30,000 of contributions count towards the FHSSS, and up to $15,000 from each financial year can make up this total.
Keep in mind there are still normal super contribution caps. You can contribute up to $25,000 for concessional (pre-tax) contributions (this includes your employer contributions), and up to $100,000 for non-concessional (post-tax) contributions in the 2017/18 financial year ($300,000 if you are eligible under the bring-forward rule).
Compulsory employer contributions (generally the SG amount that your employer puts into your super account) cannot be withdrawn as part of the benefit.
There you have it!
Taking advantage of the FHSSS means you’ll build up the money for your first home deposit faster. There are conditions that apply – the ATO website lists what you need to do First Home Super Saver Scheme. If you have any questions get in touch and we’ll chat you through it. Call our Super Specialists on 133 464 (8am-8pm Monday to Friday, 9am-5pm Saturday AEST/AEDT).
Read on to find out how you can nurture your super anytime and anywhere.
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