Save Faster for Your First Home

Everything you need to know about The First Home Super Saver Scheme (FHSS)

We’ve got great news for Australian first home buyers looking to buy their first home down under!  The First Home Super Saver (FHSS) scheme allows you to use some of your eligible voluntary Superannuation contributors towards buying your first home.  You can withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings.

Here’s what you need to know about the enhanced FHSS scheme and how it can benefit you.

Understanding the First Home Super Saver Scheme

The FHSS scheme allows first-home buyers to save for their deposit through their superannuation, reducing taxable income in the process. From 1 July 2022, the maximum amount you can release under this scheme increased from $30,000 to $50,000.

How Does FHSS Work?

Under the FHSS scheme, you can make voluntary super contributions of up to $15,000 each financial year to save for your first home. These contributions can come from your salary or savings. The significant advantage here is that these contributions are taxed at only 15%, which is generally lower than your marginal tax rate, potentially allowing your savings to grow faster than in a regular bank account.

Additionally, a percentage of the earnings from your contributions is included when calculating how much you can withdraw through the FHSS. This figure is determined by the Australian Taxation Office (ATO), not your super fund.

Here’s how it works in practice:

1. If you salary sacrifice $15,000 annually for three years ($45,000 total), and the ATO calculates that you earned $5,000 from that investment, you can then apply to release the full $50,000 amount.
2. For couples, each partner can save within their individual super accounts, potentially allowing for a combined FHSS release of $100,000.

If you opt to salary sacrifice $10,000 a year, you might need four to five years to reach the $50,000 cap, or you can access a lower amount sooner.

Tips from the experts:

– Maximise Contributions: Consider increasing your voluntary super contributions to reach your savings goal faster.

– Monitor Super Earnings: Keep track of your superannuation earnings to better estimate your potential FHSS release amount.

 Eligibility for the FHSS Scheme

To participate in the FHSS scheme, you must be 18 or older and have never owned property in Australia. Eligibility is assessed individually, meaning each participant can use their own FHSS contributions toward the same property, even if buying with someone who already owns property.

Get ahead, quicker:

– Check Eligibility Early: Confirm your eligibility before starting the FHSS process to avoid any delays.

– Plan Joint Purchases: If buying with someone else, ensure that all eligible parties maximise their FHSS contributions.

Getting Your Funds in Time for Settlement

Timing is crucial to ensure your funds are released in time for property settlement. The ATO process can take some time, so start the FHSS process early, ideally when you first apply for home loan pre-approval. Allocate at least six weeks for each step.

Steps for success:

1. Apply for FHSS Determination: Request a determination from the ATO using your MyGov account. The ATO will calculate and confirm the amount you can release.
2. Request Funds Release: Once you have the determination, request the release of your funds through MyGov as soon as possible.

Ensure you receive your FHSS determination before signing any property contract. The ATO website provides detailed conditions for releasing money under the FHSS scheme.

– Early Application: Apply for your FHSS determination as soon as you start considering property purchases.

– Track Timelines: Keep a timeline of key dates and deadlines to ensure a smooth release and settlement process.

One-Time Use and Time Limits

You can only use the FHSS scheme once. From the date you make a valid release request, you have up to 12 months to sign a property contract and notify the ATO.

Make sure to:

– Plan Ahead: Have a clear timeline and plan for when you intend to purchase property.

– Stay Informed: Regularly check for updates on the FHSS scheme and ATO requirements.

The FHSS scheme can be a powerful tool to help you save for your first home deposit faster than a regular savings account, and it can help you pay less tax. We’re here to help you manage the timelines and rules involved, ensuring your funds are released in time for settlement.

By understanding and leveraging the FHSS scheme, you can make the most of your savings and achieve your dream of homeownership sooner. If you’re considering using the FHSS scheme or want to know how it can help you own your first home sooner, please give us a call.

For further information visit – https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme