First Home Super Saver Scheme: A Pathway to Your First Home
Saving for your first home can be a daunting task, but the First Home Super Saver Scheme (FHSSS) offers a tax-effective way to accelerate your savings. This guide explains how the scheme works, eligibility requirements, and the benefits of using superannuation to save for your first home.
How the FHSSS Works
The FHSSS allows eligible individuals to make voluntary contributions to their superannuation account and withdraw these contributions, along with associated earnings, to use as a deposit on their first home. Key steps include:
Make voluntary contributions of up to $15,000 per year, capped at a total of $50,000.
Ensure contributions comply with annual caps and are within your total super balance limits.
Apply to the Australian Taxation Office (ATO) for a FHSS determination to confirm your eligible withdrawal amount.
Request a release of funds before purchasing a property or signing a contract of sale.
Why Use Super to Save for a Home Deposit?
Tax Advantages:
Earnings within super are taxed at up to 15%, significantly lower than the marginal tax rate (up to 47%, including Medicare levy) on savings held outside super.
Depending on the contribution type, voluntary super contributions may reduce your taxable income.
Boost Your Savings:
The tax efficiency of super can help you accumulate more funds for your deposit compared to traditional savings accounts.
Eligibility Criteria
To qualify for the FHSSS, you must:
Be at least 18 years old at the time of applying to withdraw funds.
Have never owned real estate in Australia, including residential, investment, or business properties (exceptions apply for financial hardship provisions).
Make eligible voluntary contributions to your superannuation account.
Types of Contributions
Voluntary contributions eligible for the FHSSS include:
Salary Sacrifice Contributions: Arranged through your employer.
Personal Contributions: After-tax contributions or those claimed as a tax deduction.
Ineligible contributions include:
Mandatory employer contributions (e.g., Super Guarantee).
Spouse contributions or government co-contributions.
Contributions made on your behalf by another person.
How to Apply for Funds Release
Request a FHSS Determination:
Use myGov to apply for a determination from the ATO, which will confirm the maximum amount you can withdraw.
Ensure you apply for the determination before signing a property purchase contract.
Request to Withdraw Funds:
Once you’ve received the determination, submit a release request via myGov.
If you’ve already signed a contract, ensure the release request is made within 90 days of signing.
Purchase a Home:
After funds are released, you must purchase or build a home within 12 months. Extensions may be granted by the ATO in some cases.
Taxation of Withdrawals
Withdrawn amounts may include:
Concessional contributions and associated earnings, taxed at your marginal tax rate minus a 30% tax offset.
Non-concessional contributions, which are tax-free.
What Happens If You Don’t Purchase a Home?
If you don’t purchase a home within the required timeframe, you can:
Recontribute the released funds into your superannuation account as a non-concessional contribution.
Pay FHSS tax of 20% on the assessable amount of the withdrawn funds.
Strategic Considerations
Maximize Contributions:
Use salary sacrifice arrangements or claim tax deductions for personal contributions to boost your savings.
Plan Withdrawals Carefully:
Ensure you apply for a FHSS determination well before committing to a property purchase.
Seek Professional Advice:
Work with a financial adviser to optimize contributions and withdrawals and align them with your overall financial goals.
