How does the First Home Super Saver Scheme work?

The First Home Super Saver scheme (FHSSS) helps you save for your first home by allowing you to make voluntary contributions to your superannuation fund.

In this article, we cover what FHSSS is, eligibility criteria, FHSSS contribution limits, tax implications and more.

About the FHSSS

The First Home Super Saver Scheme is a government scheme for first-home buyers that allows them to build a deposit inside superannuation, which costs less in taxes.

The FHSSS applies to all contributions made from 1 July 2017. These contributions are taxed at just 15%, which is lower than your regular income tax rate. When you withdraw your savings under this scheme, you get a 30% tax offset on the assessable amount.

Under this scheme, you can contribute up to $15,000 per financial year, with a total cap of $50,000 for all years of contributions.

What Are The Eligibility Criteria For The FHSSS?

Eligibility for the FHSSS is assessed individually, which means couples, friends or family members can each access their own eligible FHSSS contributions to purchase the same property.

If one person has previously owned property, it won’t affect others who are still eligible.

To use the FHSSS, you need to meet all of the conditions below:

• 18 years or older when you request an FHSSS determination. Eligible contributions made before turning 18 can still count.

• You’ve never owned a property in Australia, including investment properties, vacant land, commercial property, leases of land and company title interests i.e., you are a first home buyer.

• Your name will appear on the title of the property you purchase.

• You haven’t previously completed an FHSSS release request tied to a determination in your name.

• If you have owned property before, you may still qualify if you’re found eligible under the FHSSS financial hardship provisions.

What Are FHSS Scheme Contribution Limits?

The FHSSS has the following contribution limit:

• Annual limit: $15,000 per financial year

• Total Limit: $50,000 across all years

There are various types of contribution types for FHSSS:

Concessional: These are pre-tax contributions, such as salary sacrifice or personal contribution with a tax deduction, taxed at 15%.

Non-concessional: After tax contributions, not taxed on deposit.

Deemed earnings: Calculated using the ATO’s shortfall interest charge rate.

Can You Make Voluntary Contributions?

Yes, you can make voluntary contributions to your super and boost your savings under the FHSSS.

For this, there are two main methods:

• Salary Sacrifice: Set up through your employer, where part of your pre-tax income is contributed directly to your super fund

• Personal Contributions: Paid directly by you into your super, from after-tax income.

And if you want to claim a tax deduction for personal contributions, you must submit a notice of intent to claim a tax deduction to your super fund before applying to release FHSSS funds.

Just ensure your contributions stay within the annual caps:

• Concessional Cap: Includes salary sacrifice and deductible personal contributions.

• Non-concessional Cap: Includes after-tax contributions not claimed as a deduction.

How Does FHSS Scheme Withdrawal Work?

You can follow the steps outlined below to access your FHSSS funds:

• FHSSS determination: First, request a determination from the ATO to confirm how much you can withdraw.

• Release request: Once the determination is complete, submit a release request to the ATO to access the funds.

• Timing: You must receive the funds before signing a contract to buy or build a home.

• Use of funds: The money must be used to purchase or construct a residential property in Australia.

What Type of Property Can You Purchase with FHSS Scheme?

You can use FHSSS funds to buy or build a residential property in Australia, including vacant land if there’s a contract to build.

Ineligible properties include houseboats, motor homes or anything not suitable for permanent residence.

Another requirement is that you must live in the property for at least six months within the first 12 months that it’s practical to do so.

What About Timeframes And Extensions?

After your first home super saver scheme funds are released, you have 12 months to sign a contract to buy or build. If you need more time, you can request a one-time, 12-month extension from the ATO.

And if you don’t proceed with a purchase, you have the option to return the funds to super to pay tax equal to 20% of the concessional portion released.

Get the Most from FHSS Scheme

If you are a first time homebuyer, the First Home Super Saver scheme can be a powerful tool. You can use it to leverage the tax advantages of superannuation to fund your dream home purchase.

The scheme requires planning and awareness but offers real financial benefits. So, whether you’re contributing through salary sacrifice or personal payments, staying within the caps and following the ATO’s process is key.

If you’re ready to take the next step, consider seeking personalised advice or start with a free assessment to see how the FHSSS scheme can work for you.