How super can help you buy your first home!
Housing affordability has been a hot topic for a while, and many people have been finding difficult to successfully save for their own home. In response, the Government has introduced the First Home Super Saver Scheme (FHSSS) to provide another avenue for young people to afford their first house.
How it works...
The FHSSS is designed to help you save for a house deposit through your super. You can make voluntary contributions into your super fund, (that’s anything you deposit into your super on top of the compulsory contributions your employer makes), which can later be put towards a house deposit.
You can then apply to "release" your voluntary contributions, along with associated earnings, to help you purchase your first home.
Some key things to note:
- You can only apply to release your voluntary contributions once.
- In order to apply for the release, you must meet certain eligibility requirements (listed below).
- Voluntary contributions can be either concessional (before-tax) or non-concessional (after-tax).
- Normal super contribution caps still apply.
- You must wait to sign your contract to purchase or construct your home until after the ATO has released your money (or you may be liable to pay tax).
- It will take around 25 business days for you to receive your money after the ATO has approved the release.
- You don’t need to tell your super fund that you’re contributing to the FHSSS.
- Contributions to a defined benefit fund or constitutionally protected fund are not eligible.
How do you release the money from your super fund?
First, you apply to the ATO to withdraw the amount to put towards your home loan.
You can withdraw up to a maximum of $15,000 from any one financial year, and $30,000 in total across all years of the eligible contributions you make. Be careful - this includes a deemed earnings rate on your contributions calculated by the ATO (rather than the actual earnings).
The ATO will let you know the maximum amount that can be released, the associated earnings, and the tax that will be withheld.
After you make your FHSSS withdrawal, you have 12 months to sign the contract to purchase or build a home. You are also required to occupy
the home for at least six months of the first year after the purchase (after it is practicable to move). If not, you may be required to
put the money back into your super, or pay additional tax.
Who is eligible?
You must be:
- 18 years old;
- Have never owned property in Australia before. (This includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia);
- Have not previously requested the Commissioner to issue a FHSS release authority in relation to the scheme.
Eligibility is assessed on an individual basis. So, the good news is that couples or friends can each access their own eligible FHSS contributions to purchase the same property. If a couple is buying a house and one person in the relationship has previously owned a home, it will not stop the other person applying if they are eligible.
The Commissioner of Taxation can also make exceptions for previous property owners if they determine that you have suffered a financial hardship.
While the scheme can assist with the saving process, it definitely doesn't replace having to diligently save money in your regular bank accounts. The process is complicated, and you need to be wary of the fine print, so we recommend you research the FHSS Scheme thoroughly if you intend on using it, and definitely talk to your tax advisor to ensure the process runs smoothly!
Read more on the FHSSS on the ATO website.