Buying your first home is a dream many Australians think is out of reach and saving for a deposit in an increasing property market only deflates one’s saving momentum.
The bank of mum and dad or an unexpected inheritance from that great aunt can assist, however, it is not often a bankable deposit.
The federal government has a saving scheme that helps first homebuyers make every dollar saved work that little bit harder.
I guarantee that many of you reading this have never heard of the First Home Super Saver Scheme.
So why are so few Australians saving for their first home through the First Home Super Saver Scheme? It is complicated, let me explain.
What is the First Home Super Saver Scheme (FHSSS)?
It is an interesting savings option that allows savings to be deposited and withdrawn from your superannuation account.
The deposit earns a set rate of return of 3% above the 90-day Bank Bill rate (0.12% p.a. as of 29/10/2021).
Investment earnings are taxed internally within superannuation at a maximum of 15%.
The voluntary super contributions that can be made are:
- non-concessional contributions
- salary sacrifice contributions
- personal deductible contributions
- limited by annual contributions caps (learn more in our previous blog article).
What are the FHSSS contribution limits?
- Annual limit – $15,000 of voluntary contributions
- Total limit – $30,000 on all voluntary contributions (may increase to $50,000 once legislated).
What are the eligibility requirements?
The applicant must:
- be over 18 at the time the determination is requested
- have no previous FHSSS release authority
- have never previously owned an interest in Australian real property (with some exceptions involving financial hardship provisions)
- occupy or intend to occupy the property as soon as practicable
- intend to occupy the property for at least 6 of the first 12 months that it is practicable to occupy the property.
The property must:
- be located in Australia
- a real property
- capable of being occupied as a residence
- not a mobile home or houseboat.
What is the maximum release amount?
To sum it up, the FHSSS maximum release amount is:
- the total eligible contributions subject to the above limits, plus
- proportioned earnings (the set rate of return) on the voluntary contributions, less
- any applicable contributions tax.
To release the savings from super you need to apply to The Australian Tax Office (ATO) who will calculate the maximum amount that can be withdrawn upon a determination request.
A valid request must be made to the ATO within 14 days of entering a contract. If a release request is made first, you have 12 months to purchase a home and sign a contract. You must notify the ATO within 28 days of signing the contract.
Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.