The First Home Super Saver Scheme (FHSSS) yesterday passed the Australian senate, allowing first home buyers to boost their deposit saving by up to $30,000 or $60,000 for couples.
From 1 July 2018, the scheme will allow you to withdraw voluntary super contributions (capped) you made into the account since 1 July 2017 to put towards your deposit.
It’s a win for first home buyers…even if it doesn’t go quite far enough.
What’s the problem with the FHSSS?
The benefits
- When you contribute funds, you’ll get a 30% discount on your marginal tax rate.
- You’ll earn interest based on the 90 day Bank Bill Swap Rate (BBSR) plus 3 percentage points (as per the Shortfall Interest Charge).
The many drawbacks
- You can only contribute a maximum of $30,000 over two years, with your contributions capped at $15,000 per year.
- Despite the 30% tax offset on concessional contributions, you’re still being taxed for trying to save for a deposit!
- Your so-called “deemed” rate of return is actually less than what your super fund would normally generate.
The Turnbull Government claims that the scheme would boost savings by up to 30% but the numbers just don’t add up when you consider that median house prices in Sydney and some of ther capital cities have hit the $1 million mark.
So should I start making contributions?
We cannot provide financial advice so it’s essential you speak to your accountant as to whether this scheme will help you reach your deposit goals.
However, you should bear in mind that it’ll take you at least two financial years to access up to a maximum of $30,000 to put towards your deposit, contributions that have still been taxed and only generated a modest return.
In the meantime, increasing property prices are continuing to put homeownership out of reach for many Australians.
If you’re struggling to save a deposit, there are no deposit solutions available right now, including the popular guarantor loan option.
Call us on 1300 889 743 or fill in our online enquiry form and find out how we can help you start the home buying journey today.
Too little, too late for the government?
The First Home Super Saver Scheme was first announced in the May 2017 Budget by Treasurer Scott Morrison and introduced into parliament in September.
With cross bench support, it has now passed both houses of parliament but we believe it’s a token move by the government to show that it has at least done something to help first home buyers.
The problem is that it doesn’t really address housing affordability.
And in many ways, it’s simply a “watered” down alternative to the policically-charged super as a deposit debate.
Industry Super Australia (ISA) itself recently said that the scheme “would offer limited benefits to first home savers.”
Amendment gives second chance for financial hardship
Under an amendment to the FHSSS bill, those suffering financial hardship will now be able to withdraw funds for the purposes of buying a home, even if they previously owned a property.
According to SuperConcepts general manager technical services and education Peter Burgess (speaking to SMSF Adviser, the addition of this amendment is designed to help people get back into the housing market after a serious life event.
This could include divorce, a relationship breakdown, the death of a partner or another major event that may has put someone’s back against a wall.
We don’t know exactly the elibility criteria for what is deemed as “financial hardship” but it may be similar to the financial hardship conditions already built-in to super.
The financial hardship amendment will be independently reviewed in 18 months.
Retirees may also benefit under the scheme
From 1 July 2018, Australians aged 65 and over who sell a home they have for a minimum of 10 years may contribute up to $300,000 ($600,000 for couples) from the proceeds into their superannuation accounts.
Disclaimer
The above information should not be considered as financial advice. Parts of the First Home Super Saver Scheme (FHSSS) bill may still be amended. You should seek advice from a tax accountant before making any decision regarding superannuation.