It’s certainly a challenge trying to save for your first home in today’s tense financial climate. The minimum down payment amount seems to be on an endless uphill climb. So are all your other expenses, with everything from fuel and rent to electricity and avo toast becoming harder and harder to manage. As your friendly, local accountants, we’re on the front lines of the cost of living crisis. Every day, we see first-hand how devastating it is for young Australians who just want a home of their own and the security that goes along with it.
Help is at Hand
One of our overarching goals at ITP is to help Australians become financially stable and independent. For this reason, we provide a regular stream of free information on everything from maximising your tax deductions to saving for a home deposit. In today’s post, we’ll be focusing specifically on the First Home Super Saver (FHSS) Scheme. However, if you’d like more general advice on improving your financial literacy and saving more money from every paycheque, take a look at our Simple Money Saving Tips.
If you’re curious to learn more about the FHSS scheme, let’s get right into the juicy details!
What Is the First Home Super Saver Scheme?
In simple terms, the FHSS allows eligible first home buyers to save for a deposit inside their superannuation fund. This means you can contribute extra money (voluntary contributions) on top of your regular super contributions, and under certain conditions, withdraw these contributions (plus any earnings they accrue) to use towards your first home purchase. It’s essentially saving for your deposit with the benefit of tax advantages.
You can withdraw a maximum of $15,000 per financial year to put towards a home deposit. Since the 2022-23 financial year, the maximum total withdrawal allowable is $50,000 across all years. However, it’s important to note that if you made your first $15,000 withdrawal before 1 July 2022, you’ll be stuck with the old $30,000 limit. A little frustrating, yes, but we have good news to wash it down with!
How to Get Maximum Value from the FHSS Scheme
Eligibility for the FHSS scheme is assessed on an individual basis. So if you’re looking at buying a home with your partner, siblings, or friends, each of you can access your own eligible FHSS contributions for the same property. This can drastically increase your purchasing power, making it potentially one of the best moves you can make. We say “potentially” because, of course, buying a property with other people comes with its own set of complications. It’s recommended that you seek professional advice and ensure all contracts and obligations are clear and well-documented.
Pro tax tip: Thinking of buying with someone who’s already owned a home previously? They won’t be eligible, but that won’t stop you (and any other eligible parties involved in the purchase) from applying.
How Does the FHSS Scheme Work?
When you salary-sacrifice using your super fund, you pay less tax. This means you can build a bigger deposit faster. If you’re a couple, you can both use the scheme, allowing you to combine your individual $50,000 limits. Additional voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund can also be made, with the purpose of saving for your first home.
Before-Tax Concessions
The great news is that if you voluntarily contribute to your super account using your pre-tax income, your tax rate is reduced to 15%. This is a significant win compared to the marginal tax rate, which could be anywhere from 18% to 48.5%.
After-Tax Concessions
You can also contribute to your super using money from your regular bank account, savings, inheritance, or from the proceeds of an asset after tax has been applied. The benefit? After-tax contributions, which have already been taxed outside super, are not taxed again inside super.
Quick Summary of FHSS Scheme Benefits
- Tax Breaks: Voluntary contributions made towards your FHSS balance can be concessional (before tax) or non-concessional (after tax). Concessional contributions are taxed at a lower rate than your income, potentially giving your savings a significant boost.
- Increased Savings Potential: The FHSS scheme allows you to contribute up to $15,000 per financial year (with a maximum total of $50,000) towards your FHSS balance. This can significantly accelerate your deposit savings compared to a traditional savings account.
- Combined Savings Power: If you’re buying with a partner, both of you can contribute to the FHSS scheme, potentially increasing your combined deposit savings to $100,000.
READ ABOUT HOW TO GET THE MOST FROM THE 2019 TAX TIME
How to Apply for the First Home Super Saver Scheme
Your first step is to determine whether you’re eligible. To qualify for the FHSS scheme, you must satisfy the following requirements:
- First Home Buyer Status: You must be a first home buyer, meaning you’ve never previously owned a property in Australia (including investment properties or vacant land).
- Age Requirement: You must be 18 years or older when applying for an FHSS determination or requesting a release of funds.
- Superannuation Account: You need an active superannuation account to participate in the scheme.
- Contribution Limits: There are existing contribution caps for superannuation. Ensure your FHSS contributions stay within these limits to avoid any tax implications.
- Genuine intent: You must use your super savings to purchase your first property in Australia.
Additional rules may apply to your situation, so do your research before making any decisions.
How to Withdraw Contributions from the FHSS Scheme
The first step is to sign a contract to build or buy your home. Then you can request the release of your FHSS money up to 14 days prior. You’ll have 12 months from the date you request to withdraw your FHSS money to purchase or build your home. When you withdraw your savings to purchase your first home under the FHSS scheme, you will receive a 30% tax offset. Any after-tax contributions you made still won’t be subject to additional tax. This means you’ll have more money at your disposal.
You’ll only be able to use the scheme once, so choose wisely. Once the purchase is complete, you must live in your property for at least six months.
Expert Help with the FHSS Scheme
Buying your first home is a whirlwind, and the FHSS scheme shouldn’t add another layer of stress.
Here’s the good news: you don’t have to go it alone. Think of your registered tax agent as your personal FHSS assistant. We can guide you through setting up voluntary contributions, help you understand the paperwork, and deal with the ATO on your behalf when it’s time to buy. With expert guidance every step of the way, you can save your deposit faster, and make smart decisions, knowing a team of professionals has your back. Best of all, you’ll be free to focus on the fun parts of finding your dream home.
With over 240 offices nationwide and nearly 50+ years of experience helping Australians manage their finances, ITP has the expertise you need to get your first home faster.
Ready to simplify your FHSS journey? Book your appointment with ITP today and get matched with a skilled accountant who cares about your financial future.
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