What is the First Home Super Saver Scheme?
The first home super saver (FHSS) scheme allows people to save money for their first home inside their super fund. This means first-home buyers may be able to use their super fund as a tax-effective way to save for their home deposit.
Who is eligible?
You can use this scheme if you are a first home buyer and both of the following apply:
• You are an Australian resident 18 years or older
• You will occupy the premises you buy or intend to as soon as practicable.
• You intend to occupy the property for at least 6 months within the first 12 months you own it, after it is practical to move in.
How does it work?
You can withdraw voluntary super contributions which you’ve made since 1 July 2017 to put towards a home deposit.
You can put away up to $15,000 per financial year into your super, and withdraw these amounts (plus associated earnings/less tax) from their super fund to under the FHSSS, up to a limit of $50,000 per person.
What counts as a voluntary super contribution?
Voluntary super contributions don’t include the compulsory super guarantee contributions your employer is required to make into your super fund, if you’re eligible.
Spouse contributions, which are those that your partner may choose to put into your super fund, also can’t be withdrawn under the scheme.
What types of voluntary contributions can be withdrawn?
Voluntary contributions that can be withdrawn include:
Salary sacrifice contributions
These are contributions you can get your employer to pay you out of your before-tax income if you choose to, which are on top of what your employer might pay you under the super guarantee, if you’re eligible.
Tax-deductible super contributions
These are contributions you can make (such as when you transfer funds from your bank account into your super) that you then claim a tax deduction for.
Personal super contributions
These are contributions which you can also make by transferring funds from your bank account into super, but which you don’t claim a tax deduction for.
How does the scheme benefit first home buyers?
First home buyers can grow their deposit more quickly from the tax savings under the FHSSS.
When money is withdrawn under the FHSSS, amounts that were contributed as before-tax or tax-deductible contributions are taxed at your marginal tax rate, less a 30% tax offset, while amounts that are contributed as after-tax contributions aren’t subject to additional tax.
Note that tax will also apply to the associated earnings.
How do I withdraw contributions under the scheme?
To make a withdrawal under the scheme, an application to the Australian Taxation Office (ATO) will be required, and an eligible person is only allowed one FHSSS withdrawal in their lifetime.
What else should I be aware of?
1. Before you can request a withdrawal, you must first get a ‘determination’ from the ATO using your myGov account. The determination tells you how much you can withdraw under the scheme. You can ask for as many determinations as you like but can make only one withdrawal request.
2. You must buy residential premises. This includes vacant land (if you’re planning to build), but not any premises that can’t be occupied as a residence, including a houseboat or motor home.
3. You’ll need to buy a home or land to build on within 12 months of withdrawal, which can be extended to 24 months if required.
4. FHSSS amounts that are withdrawn not subsequently used for a property purchase must be put back into super as after-tax contributions, or penalties will apply.
5. The first-home buyer must live at the property for at least six months in the first 12-month period from when it can be occupied.
6. Get professional advice and research if any additional rules that may apply to your situation.
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Disclcaimer: The information provided within this article is general information only. None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.
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