First Home Super Saver Scheme
Saving a deposit for your first home can be hard work, but the First Home Super Saver Scheme (FHSS scheme) could give you a helping hand.
The FHSS scheme allows you to save money for your first home within your super by making voluntary super contributions.
Tax benefitsContributions inside super may save you on tax.
Controlled savingsSavings can only be used to pay for your house so you can’t dip into them for other things.
Protected savingsThe full contribution amount can be withdrawn even if reduced by negative investment markets^
How it works
Anika is 30 and wants to stop renting.
She decides to save for a home deposit using her super.
She earns $80,000pa and decides to contribute $10,000 each year from her pre-tax salary into her super. This type of contribution is taxed at 15%, so each year $1,500 was removed for tax by her super fund and $8,500 went towards her FHSS scheme savings.
Looking forward, Anika turns 35 and has found the perfect place to buy.
She can withdraw her savings in super which is made up of the $42,500 she contributed, and investment earnings over the past 5 years. Using the FHSS scheme she has managed to save $49,188*.
If she had built her deposit in a savings account outside of super, Anika’s $10,000 would have been taxed at the marginal rate of 32.5% leaving her with $6,750 per year. After five years she would have saved $36,716*.
Five years into the future, Anika has managed to save an additional $12,472* by using the FHSS scheme.
If Anika pooled her savings with her sister Elena who also used the FHSS scheme, they would have a combined deposit of $98,376*!
The FHSS scheme rules can be complex so let’s get into the nitty gritty
- The FHSS scheme lets you withdraw a maximum of $50,000 of your voluntary contributions to your super plus associated earnings. This does not include the amount your employer adds to your super – only the contributions you make yourself from your own salary.
- You’ll also need to stick to an annual FHSS scheme contribution limit of $15,000 and keep your eye on the contribution caps so you’re not paying extra tax. This means to access $50,000 of savings you’ll need to save up over a few years.
- You can team up with a friend, relative or partner and combine your FHSS scheme savings to buy or build a residential property within Australia. But, you won’t be able to use these funds to buy a houseboat, motor home, or a property you can't live in, such as a shop.
- Voluntary contributions made from 1 July 2017 can be taken out only once, and you must buy or build a property within 24 months of the withdrawal. If you change your mind you need to put the money back into your super or withdraw it and get taxed.
- If you find your ideal home, you shouldn’t sign a contract until you have a FHSS scheme determination from the Australian Tax Office (ATO). After signing your contract, you have 90 days to request a release from your super fund. You’ll also need to keep in mind the withdrawal will take about 15–25 business days to be processed.
- When your FHSS scheme funds are released, you’ll need to include this withdrawal on your tax return.
Am I eligible?
The FHSS scheme is generally available to those who are over 18 who are yet to own a property in Australia.
You just need to make extra before or after-tax contributions into your super account to start saving.
Need help making sense of the FHSS scheme?
The FHSS scheme can help you save for a deposit faster but the rules around it can be tricky. As part of your CareSuper membership you can give us a call to talk about the FHSS scheme and how super contributions can be used to create your brightest future. Or for more comprehensive advice you can book in to see one of our experienced financial planners for a competitive fee. Book a call-back today.
^ This assumes you have other super besides the contributions you have made to your account. If your account balance falls below the total amount that you contributed (plus the interest), you'll only be able to withdraw the balance of your account at the time of withdrawal.
*Assumptions: Based on a salary of $80,000pa, with $708.33 salary sacrificed monthly for 5 years and a deemed earnings rate of 6.9%. When the FHSS scheme funds are released this will need to be included on Anika’s tax return. Savings outside of super assume a monthly deposit of $562.50, a savings interest rate of 5% p.a. and does not include the medicare levy. Elena earns and contributes the same amount to FHSS scheme as Anika. There is no allowance for inflation. This example is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome.
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