In May of last year, the Government released the Federal Budget introducing the First Home Super Saver Scheme (FHSS) to address issues of housing affordability in Australia.
Under this scheme, you are now able to save money for your first home through your superannuation fund meaning first home buyers save faster under the concessional tax treatment on investment returns.
Superannuation contributions can be divided into two types – concessional (before-tax) and non-concessional (after-tax) contribution.
From the 1st of July 2018, you will be eligible to apply to release voluntary contributions made since the scheme was introduced in July of last year.
The ATO will be responsible for assessing eligibility of the scheme, and so you should confirm your eligibility before making contributions.
To eligible from the FHSS you must:
- be 18 years or older
- be an Australian resident for tax purposes
- haven’t previously requested a release from super under the FHSS
- you mustn’t have previously owned property in Australia, including investment or commercial properties.
Regarding the property you are purchasing, you must:
- either live or intend to live in the premises you are buying as soon as practicable or
- intend to live in the property for at least six months of the first 12 months you own it, after it is practical to move in.
According to the Department of the Treasury, the FHSSS could increase the deposits of first home buyers’ by 30% compared with saving through a standard deposit account.
Some benefits of the scheme include:
- Investments outside the scheme can be taxed up to 47% depending on your marginal tax rate.
- Investments through super are more likely to garner more favourable tax treatment than standard deposit accounts.
- You will be more accountable to your savings as you can’t make withdrawals until ready to sign a contract to your new home.
If the amount is not needed for a home deposit, you can retain the amount in superannuation and build your retirement savings.
How to withdraw
To apply to release funds under the FHSSS you need to submit a request using an approved form to the ATO. Under the scheme, first home buyers will only be able to withdraw up to $15,000 per financial year and $30,000 maximum as well as a deemed rate of return determined by the ATO. These withdrawals are doubled for couples. The type of the voluntary contributions you make can make a difference to the amount released back to you.
You can withdraw, taking into account the limits stated above:
- 100% of your non-concessional (after-tax) amounts
- 85% of concessional (pre-tax) amounts.
The order in which you make the contributions and which type also play a role in what you are given back.
Note, if you change your mind after making voluntary contributions and don’t want to purchase a home or don’t meet eligibility criteria you will not be able to touch these contributions until you retire.