First Home Super Saver – tips and traps
The First Home Super Saver Scheme (FHSS) was introduced by the Federal Government in the last budget as a measure to assist with housing affordability and to help first time buyers get ahead with saving a deposit. It is also available to some people who the ATO determines have suffered ‘financial hardship’.
At the time of its introduction, our current PM Scott Morrison was still the Treasurer and he touted the idea as a plan that would help young home buyers “accelerate their savings by at least 30%.”
Basically, the FHSS scheme allows you to save money for your first home inside your superannuation fund and applies to voluntary contributions made from 1 July 2017.
The government’s FHSS estimator shows that for an Aussie homebuyer on a $70,000 salary who sacrifices $15,000 a year through the FHSS, their take home pay would be reduced by $9,650 a year, or about $800 a month. After 2 years of saving, this person could have built up $25,355 in savings to put toward a home deposit.
In essence, which is why the scheme was spruiked as a good idea, is that it lets people save from their pre-tax income via super, rather than their after-tax income. Which, in theory makes saving a little easier. And it is a good idea, but there’s a lot of fine print to be navigated.
A recent survey by Gateway Bank, published by MOZO, shows that less than half of Australians have heard about the FHSS scheme, and – uh oh, less than 1% of people surveyed were able to recall the details.
And that’s because the scheme sounds simple, but it’s actually really quite complicated.
Let’s break it down a bit.
Voluntary contributions to the scheme include salary sacrifice, personal deductible, voluntary employer and non-concessional contributions. Mandated employer contributions, such as super guarantee (SG) contributions cannot be used under this scheme.
Whoa. There’s a whole lot of jargon right there. But really, this means that you can save only through contributions you make personally via salary sacrifice or personal deposit (and remember there are caps on what you can contribute to your superfund each year.
Under the FHSS, contributions made from 1 July 2017, can be withdrawn for a home deposit from 1 July 2018. And here’s where it gets really very complicated.
Making a withdrawal
The maximum amount you can withdraw is calculated by the ATO. The maximum withdrawal amount is up to 100% of your non-concessional (after-tax) amounts
85% of concessional (pre-tax) amounts.
It’s worth noting also that the tax implications associated with the scheme, mean you must also declare it in your tax return. The maximum amount of contributions that can be counted towards the release under the FHSS is $15,000 per financial year and $30,000 in total. The ATO will identify the maximum amount capable of being released based on your past contributions and associated earnings.
You can then elect how much you want to withdraw, up to the maximum amount, but this is a one-off withdrawal – you cannot take more out at a later date. There is also a timeframe in which you must commit to using the money towards your home (build or buy) and you must not commit to a contract until your money has been released. If you don’t use the FHSS amount within 12 months, you need to apply for an extension.
Once the FHSS money is released, the ATO will withhold an appropriate amount of tax (less applicable offsets). The money received will need to be added to your assessable income when completing your tax return. Should you have any Commonwealth debts outstanding these would be deducted from your FHSS released amount before you receive the money.
If you have a partner, family or friends that you intend to buy with, who also fit the FHSS criteria, then you can individually apply and use contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying. However, you cannot ‘buy-into’ a home or land title that your partner already has so you can obtain ‘joint-ownership’. You cannot buy a home outside of Australia and you must prove that whatever you purchase, you intend to live in.
If you intend to apply for other State Government First Home Buyer concessions then you need to check the criteria in each state, and ensure that you’re eligible for these as well as FHSS.
Before you do anything
Check in with your Super Scheme. Sometimes withdrawing funds comes with fees attached – make sure you know what these are. Also contact the ATO. You need to apply for a first home super saver (FHSS) determination and get educated on the ins and outs of your responsibilities and entitlements.
The scheme is a good way to save money for a home, but there are a number of complex details that will affect your tax position and exactly how much you’re able to save and withdraw. Because these are determined by your individual circumstances, it’s wise to also get some personalised financial advice.
This is general advice and should not be treated as personal advice. Jason Rapley is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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