First home super saver scheme
The first home super saver (FHSS) scheme allows first home buyers to save a home deposit within their super fund. Because super receives favourable tax treatment, it's believed that first home buyers will be able to save a deposit sooner (some might also argue that because it's safely locked away, it's got a better change of growing).
If eligible, you may be able to withdraw voluntary super contributions (made since 1 July 2017), along with associated investment earnings, to put toward a home deposit.
The maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples (this is a lifetime limit and isn’t indexed).
Voluntary contributions can be made by salary sacrificing from before-tax income, by making personal tax-deductible contributions, or by making personal after-tax super contributions.
When the money is withdrawn, before-tax and tax-deductible contributions are taxed at your marginal tax rate, less a 30% tax offset, while after-tax contributions aren’t subject to tax.
Due to the favourable tax treatment, generally available through super, this scheme intends to help first home buyers grow their deposit more quickly.
Izzy earns $70,000 per year and hopes to buy her first home. Using salary sacrifice, she directs $10,000 of her before-tax salary into super, increasing her balance by $8,500 after contributions tax has been deducted by the fund. This reduces her take home pay by $6,450.
After 3 years, she’s able to withdraw $25,892 for a deposit under the first home super saver scheme. This is $6,210 more than if the saving had occurred in a standard deposit amount.
If her partner earns and sacrifices the same amount, together they’ve saved $51,892 that they can put towards a deposit, $12,420 more than if they had saved in a standard deposit account.
What to think about
- To make a withdrawal under the scheme, an application to the ATO will be required, and an eligible person is only allowed one FHSSS withdrawal in their lifetime.
- There are super contributions which will not qualify and cannot be withdrawn under the scheme, such as super guarantee contributions made by your employer, as well as spouse contributions.
- FHSSS amounts that are withdrawn and not subsequently used for a property purchase must be put back into super as after-tax contributions, or penalties will apply.
- The first home buyer must reside at the property for at least six months in the first 12-month period from when it can be occupied.
- Additional rules may apply to your situation, so seek specialist advice before making any decisions.
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