First Home Super Saver Scheme
Saving for your first home through super
The government has recently introduced the First Home Super Saving Scheme (FHSSS) to make saving for the deposit on your first home a little easier.
Under the FHSSS, from 1 July 2018 you’ll be able to withdraw up to $30,000 of eligible voluntary contributions made to your super account from 1 July 2017 to help you purchase or build your first home.
There are a few considerations and eligibility criteria you should be aware of if you intend to take part in the scheme – and we’ve included some of the key features here.
What you need to know and key features
- Up to $30,000 of eligible voluntary contributions (plus associated earnings) per person can be withdrawn, minus any applicable tax
- A $15,000 limit applies to contributions made from any one financial year, and the $30,000 limit applies to the total eligible contributions across all years
- Eligible personal contributions include both before (e.g. salary sacrifice) and after-tax contributions
- Withdrawals will be taxed at your marginal rate less a 30% offset
- Normal contributions tax and caps still apply to your voluntary contributions
- You need to sign a contract to buy or build a home within 12 months of release of the funds from super and intend to live in the home for at least 6 of the first 12 months you own it
Who is eligible?
To participate in the FHSSS, you must:
- Be at least 18 when you request to withdraw your contributions,
- Have never owned property in Australia (including investment properties, commercial properties etc.),
- Not be purchasing vacant land, a houseboat, a motor home, or any property not capable of being occupied as a residence; and
- Not have previously requested release of money under the FHSSS.
How it can help
In basic terms, there may be tax savings available by building up your deposit through super contributions, versus traditional savings methods.
Before-tax contributions to super (sometimes known as salary-sacrifice) are generally taxed at a rate of 15%, which for many people would be less than the tax rate they pay on income outside of super (which could be up to 45%, depending on your marginal tax rate). Withdrawals of these before-tax contributions under the FHSSS are taxed at your marginal rate, less a 30% tax offset – which could be a key advantage for you over a traditional savings approach. The associated earnings (returns and/or interest) of your super savings that are invested in growth assets may also be higher than other forms of savings, like term deposits. These tax savings and higher earnings can all go towards the total deposit for your first home.
The figures we have covered are per person, so a couple can withdraw a combined total of $60,000 ($30,000 from each account) for a first home deposit.
Taking part in the scheme
From 1 July 2018, you can apply to the ATO, who will advise of the maximum amount of your super that can be released to you – which in simple terms will be the amount of the eligible voluntary contributions you have made, plus the associated earnings, minus any tax that will apply.
For full details of the FHSSS, simply visit the Australian Tax Office (ATO) website at ato.gov.au