BOOST YOUR HOUSE DEPOSIT
The First Home Super Saver Scheme (FHSSS) is designed to assist Australians in buying their first home. The FHSS scheme allows you to save for your first home inside your superannuation fund which takes advantage of the lower-taxed super system.
Firstly, what is the FHSS Scheme?
Individuals can contribute up to $15,000 per financial year, or $30,000 per lifetime limit to their superannuation. Couples can contribute up to $30,000 per year, up to $60,000 limit collectively. You can apply to release these voluntary contributions made since 1 July 2017, along with associated investment earnings to help purchase your first home. You must however meet the eligibility requirements.
Am I eligible?
Be aged 18+ years,
have never owned a property before, including a vacant land or commercial property, and
have never previously requested a FHSS release
Note: If you have previously owned a home and suffered a financial hardship, you may still be eligible to participate subject to ATO’s approval.
Before you start saving you should, check that your super fund will release the FHSS money and ask about any fees, charges and insurance implications that may apply with your fund.
How can my savings benefit? Example: Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund. After three years, she is able to withdraw $27,380 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30 per cent offset. After paying $1,620 of withdrawal tax she has $25,760 that she can use for her deposit. Michelle has saved around $6,240 more for a deposit than if she had saved in a standard deposit account. Michelle’s partner Nick has the same income and also salary sacrifices $10,000 annually to superannuation over the same period. Together they have $51,520 that they can put towards a deposit, $12,480 more than if they had saved in a standard deposit account. *Source: The Australian Government Fact Sheet 1.4 First Home Saver Scheme Budget 2017
How do I participate in the FHSS Scheme?
You participate in the scheme by making any of the following types of contributions into your superannuation account:
Salary sacrifice (before-tax) - allows your employer to make additional contributions to your super from your before-tax salary.
Personal after-tax contributions for which you claim a tax deduction - If you are self-employed or your employer doesn’t offer salary sacrifice you can make personal contributions from your after-tax salary and claim a tax deduction.
Personal contributions (after-tax) - you can also make after-tax contributions to your super account from your take home pay.
How do I withdraw my money to buy a house?
You will need to apply to the ATO for a FHSS determination and a release. Don’t forget when withdrawn as part of the FHSSS the total amount will be taxed at the marginal tax rates
Important things to note:
The ATO must release the FHSS amount before you sign a contract to purchase or you maybe be liable to pay FHSS tax
After you have requested the release, it could take up to 25 business days to receive the money
You must notify the ATO within 28 days of signing a purchase contract
You must use the FHSS amount within 12 month of receiving otherwise you will need to either apply a 12 month extension from the ATO, recontribute the amount into your super account or keep the release amount and be subject to 20% tax.
There are lots of other things to understand and consider to ensure the scheme is right for you and to make sure you comply with all the new rules. Superannuation is a very complex area and mistakes can turn into large consequences. To see if this scheme is right for you and to ensure you navigate all compliance’s correctly, contact Peer Wealth.
**The material and contents provided in this article contains general information and does not take into account your personal objectives, financial situation or needs. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact Peer Wealth on (02) 8014 7608.