How does the First Home Super Scheme work?

The First Home Super Saver scheme enables first home buyers to withdraw some of their extra superannuation contributions to use as some or all of a deposit on a property. You can use any contributions made since July 2017 and the maximum amount you can withdraw is $30,000.

This scheme helps first time buyers in several ways

You may well earn more of a return on your money as the returns on a super account is usually higher than a regular savings account or term deposit.

You can make salary sacrifices for these contributions so that they come out of your pre–tax income, letting you avoid paying tax on these deposits.

The funds in the account will be taxed at just 15 per cent, so most people using the scheme will pay much less tax on their contributions than they would do normally.

When it comes to withdrawing the money to use as your home loan deposit, it’ll be taxed at a marginal rate, with a 30 per cent offset.

How does the First Home Super Saver Scheme work?

Making your deposits

You can make voluntary contributions into your super account and if your employer is willing, you can make them via your pre–tax income to reduce your tax payments.

If your employer doesn’t offer the opportunity to salary sacrifice or you’re self–employed, then you can make your post–tax contributions to the scheme and claim tax deductions on them later. Additionally, money that’s deposited after tax isn’t taxed when you take it out.

While you can deposit up to $30,000 in total to the scheme, you have an annual limit of $15,000.

While your money’s growing

While the money is growing in the account, it’ll have a 15 per cent tax levied on it, not your regular tax rate. The earnings from the money will also be taxed at 15 per cent and when you think that most Australians pay 30 per cent in tax (or more), this is a big difference.

For example, if you deposited $1,000 in a salary sacrifice into your super fund, you’d get $850 after tax, whereas if you put it into a regular bank account at your usual tax rate, you’d get around $675 or so (this assumes you earn at least $37,000 annually).

Making your withdrawal

You can make your withdrawal when you’re ready and this will be done with the Australian Taxation Office (ATO) as it runs the scheme.

Your pre–tax contributions will be taxed at your marginal rate with a 30 per cent offset. Your marginal rate is the percentage, or per–dollar rate that you pay in your particular tax bracket. For example, if you’re in the $37,001 to $90,000 bracket, your marginal rate is 32.5 per cent on every dollar over $37,000.

Any post–tax deposits won’t be taxed when you draw them out again.

What are the eligibility criteria for the First Home Super Scheme?

There are some First Home Super Saver Scheme rules for eligibility.

You must be aged 18 or older to access your super contributions.

You must never have owned a property before, either a residential or an investment property.

You can’t use your super savings to buy a houseboat or a motorhome. You can buy vacant land, however you must enter into a contract to construct the property within 12 months of buying the land.

You can only use the scheme once, making one withdrawal.

FAQs about the First Home Super Saver Scheme

Can I use the scheme with my partner?

Yes, you can. You’ll be assessed individually, even though you’re planning to buy the property together. If you both fit the eligibility criteria and you’re making voluntary contributions to your super funds, then you can double the maximum amount to $60,000.

Can I get to my money in an emergency that’s not related to a house deposit?

If you’re in severe hardship, you’re temporarily or permanently disabled or you’ve been diagnosed with a terminal illness, you can access your money on compassionate grounds. If you need the money for something like medical bills, extended time off work or funeral expenses, then these would be considered to be compassionate grounds. There have been a few complaints about the time it takes to release funds from these accounts – 25 days on average – so do be aware of this.

Is there anything I need to watch out for?

Money deposited into a First Home Super Saver Scheme account will vary in performance, both within the same account and between different accounts. You also need to think about how long you have until retirement and adjust your risk appetite accordingly.

Is there a time limit for using the funds once I’ve withdrawn them?

Yes, once you’ve released the funds, you have 12 months to either build the property (if you bought vacant land) or sign a contract of sale.

Can I use the FHSSS with any other first home buyer assistance schemes?

Yes! The FHSSS can be used alongside the federal government’s First Home Owner Grant and the Great Start Grant in Queensland. You’ll have to meet some eligibility criteria, though. These criteria include:

  • Never having owned a residential property before
  • Being over the age of 18 and being a permanent resident or citizen of Australia
  • Buying a property and/or land that’s worth less than $750,000
  • Buying or building a new home (one that’s never been lived in before), and
  • Moving into the new home to make it your primary residence within one year and living there continuously for at least six months.

I’m not eligible for the FHSSS but I still need to raise a big deposit; what are my options?

If you can’t use the FHSSS you can still accrue some genuine savings to demonstrate how committed you are to raising that deposit. Banks and other lenders see super schemes as genuine savings, but there are other products and evidence that they’ll consider, including:

  • Any savings that you’ve held for more than three months
  • Managed funds or shares that you’ve held for more than three months
  • Any equity in property that you may have, and

Term deposits that you’ve held for at least three months.

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