The Federal Government’s First Home Super Saver Scheme might help you get that deposit together, but there are some things you need to know first.
It can be tough going getting a first home deposit together, so The First Home Super Saver Scheme (FHSS) was introduced by the Federal Government to help first time home buyers get ahead.
It is also available to some people who the Australian Tax Office (ATO) determines have suffered ‘financial hardship’.
When it was introduced, current PM Scott Morrison was still the treasurer and he touted the idea as a plan that would help young home buyers “accelerate their savings by at least 30%.”
Why? Because basically, the FHSS scheme allows you to save money for your first home inside your superannuation fund. In essence, this lets you save using pre-tax income via super, rather than their after-tax income. Which, in theory makes saving a little easier and reduces your tax liability.
… But, a recent survey by Gateway Bank, published by MOZO, shows that less than half of Australians have even heard about the scheme! More concerning is the fact that less than 1% of people surveyed were able to recall the details of the scheme.
And this is quite possibly because the scheme itself is pretty complicated. There’s a lot of jargon and quite a few rules. That’s not to say that it is not worth considering.
Here, we’ve tried to simplify the main things you need to know – but before you do anything – you need to apply to the ATO to ensure you’re eligible for the scheme. Secondly, you need to check with your superfund about the details of withdrawals (if there are fees and charges, you need to know them beforehand).
Under the FHSS, voluntary contributions are basically the deposits you make to your super via salary sacrifice or personal deposit (and remember there are caps on what you can contribute to your superfund each year.)
Any applicable contributions made from 1 July 2017, can be withdrawn for a home deposit from 1 July 2018.
The maximum amount you can withdraw is calculated by the ATO, and it is capped at $15,000 per financial year and $30,000 in total.
The ATO will identify the maximum amount you can release, based on your past contributions and associated earnings.
However, because every super scheme is different you need to understand how your own fund is applying the FHSS for members.
There is a timeframe that you must commit to. You must use your FHSS deposit within 12 months, or apply for an extension. And there’s a word of caution too – you should not commit to a home purchase or build contract until after your money has been released.
If you have a partner, family or friends that you intend to buy with, who also fit the FHSS criteria then you can individually apply and use contributions to purchase the same property.
And, if any of you have previously owned a home, it will not stop anyone else who is eligible from applying for the scheme. But, you cannot ‘buy-into’ property that’s already owned.
For example, if your partner already has a property in his/her own name, you can not ‘buy into it’ in an effort to obtain ‘joint-ownership’.
Other significant caveats include the fact that you can’t buy a home outside Australia and you need to intend to live in the property you buy. In other words, you cannot use the FHSS to buy a holiday villa in France, or an investment property.
Using the FHSS shouldn’t stop you from applying for other First Home Buyer grants and concessions if you want to.
These differ from state to state, so check in with your state body. In New South Wales, the State Government website has all the info.
In Victoria it is the State Revenue Office.
There is one significant benefit for First Home Buyers and that is, many lenders like to see proof ‘genuine savings’ in terms of your home deposit when they’re considering your mortgage application. This is ‘proof’ of money you have accumulated over a period of at least three months – it demonstrates that you’re a committed saver.
The FHSS can ensure that you achieve that, because it enables you to save over a period of twelve months.
The FHSS is quite separate from your super – it is an additional account that will hold specific FHSS savings. And special tax rules apply, so if you do decide to take advantage of saving you also need to make sure that you declare the FHSS on your tax return.
If you’d like to know more about the FHSS, you can contact the ATO or your super fund. We strongly recommend that once you have done the research, you get professional advice for your specific situation. One of our team can help you work through the ins and outs before you make any decisions.