Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6520
    -0.0016 (-0.25%)
     
  • OIL

    83.07
    +1.72 (+2.11%)
     
  • GOLD

    2,242.20
    +29.50 (+1.33%)
     
  • Bitcoin AUD

    108,797.91
    +3,877.24 (+3.70%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6039
    +0.0008 (+0.14%)
     
  • AUD/NZD

    1.0904
    +0.0024 (+0.22%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,255.30
    -25.54 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,785.64
    +25.56 (+0.06%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     

How the first home super saver scheme benefits you

Are you a first-home buyer looking to get on the property ladder? This could give you a boost.

The first home super saver scheme (FHSS) was introduced by the government a couple of years ago to give first time buyers the chance to boost their savings and get on the property ladder.

Also read: 6 tips that rocketed me to multi-millionaire status

You do this by investing extra into your super fund, which is taxed at special rates, and then withdrawing the money to help fund your deposit after a period of time.

Also read: Is Trump about to make peace with China?

From 1 July 2017, eligible people could make contributions into their super fund under the scheme and from 1 July 2018, the first withdrawals were permitted.

ADVERTISEMENT

Here’s how the scheme works:

What are the eligibility criteria?

To participate in the scheme, you need to meet certain criteria:

  • You can’t draw any money out until you are 18 years old (though you can make contributions from any age)

  • This must be your first property.

  • You mustn’t have previously asked the ATO to release any funds from the scheme.

  • You must either live in the premises you are buying, or intend to as soon as practicable.

  • You 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.

Also read: Are our superfunds stock market crash proof?

Can I take advantage of the scheme if I am self-employed?

Yes, there are no restrictions on who can take advantage of the scheme. Both employees and the self employed can participate. You simply need to meet the normal eligibility requirements (above).

How am I taxed?

Voluntary contributions into super include the amounts your employer pays into super on your behalf, any amounts you salary sacrifice or any amounts you pay into super and claim a tax deduction for through your tax return. Your voluntary contributions cannot exceed $25,000 per year and are taxed concessionally.

By way of example, say you salary sacrifice $15,000 into super, you’ll reduce your taxable income by $15,000, saving tax at your marginal rate. If you’re a typical taxpayer on the 32.5% income tax rate, that means you’ll save $4,875 in income tax (the saving is greater for higher income earners who pay tax at higher rates) meaning that the contribution has actually “cost” you just $10,125.

The super fund will pay tax at a flat rate of $15% on the contribution, which equates to $2,250, leaving $12,750 after tax in the fund. When the after tax contribution is withdrawn, it will be taxed at your marginal rate less a tax offset of 30%, which in our example equates to a 2.5% tax charge, or $318.75 (ignoring any growth in the fund that might have occurred over the period the amount was invested).

In simple terms, then, you’ve spent $10.125 on the contribution and got back $12,431.25 to put towards your house deposit, a benefit to you of $2,306.25 in relation to just one years’ contribution.

Is there a “maximum” amount I can take out?

You can take out a maximum of $30,000 of accumulated contributions but no more than $15,000 of that can relate to the contributions from any one financial year. In effect, then, you need to have made at least two years’ worth of contributions at the annual maximum of $15,000 before you can withdraw the maximum $30,000. Whilst your super has been in your fund, it will (hopefully) have grown in value due to the investment performance of the fund so you will also receive an extra amount that corresponds to the earnings on those contributions.

If you’re part of a couple and you both meet the eligibility criteria, you can jointly draw a maximum of $60,000.

What if I am buying a property with someone else and they have owned a property before?

Your ability to access the scheme is assessed only on your own circumstances, not those of anyone else you might be buying a property with.

So, ideally, each of you will be first time buyers and you’ll each be able to draw the maximum amount from your super to pay towards the deposit. But if you’re buying with someone for whom this isn’t their first property, you’ll still be eligible to draw from your super, even if the person you are buying with can’t. So, whether you’re buying as part of a couple, with siblings or friends, each of you can access their own FHSS contributions to pay towards a deposit. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.

How do I withdraw my money?

When the time comes to take money out of the scheme to put towards your deposit, you need to apply to the ATO for a FHSS determination and a release.

The ATO must have released your FHSS amount to you before you sign a contract on a property or you may be liable to pay FHSS tax.

The ATO will issue a release authority to your super fund. It will take approximately 25 business days for your fund to release your money and for the ATO to subsequently pay it to you, net of the appropriate amount of tax.

Mark Chapman is the Director of Tax Communications at H&R Block.