Saving enough money for a deposit can be one of the biggest challenges for first home buyers. To help you get into your own home sooner, you might be able to access some of your superannuation through the First Home Super Saver (FHSS) scheme. This guide is tailored for Australian doctors and dentists to help you understand how the FHSS scheme works and how it can benefit you.
What is the First Home Super Saver Scheme?
The FHSS scheme allows you to make voluntary contributions to your superannuation to help save a deposit for your first home. You can withdraw this amount, plus investment earnings, when you are ready to buy a home.
Key Points of the FHSS Scheme
1.Contribution Limits:
- You can contribute up to $15,000 each financial year.
- The total amount you can contribute is capped at $50,000.
2.Eligibility Criteria:
- You must be at least 18 years old.
- You must not have owned property in Australia.
- You must intend to live in the property for at least six months in the first year.
- You must not have previously accessed the FHSS scheme.
3. Tax Benefits:
- Before-tax contributions are taxed at 15%, which could be lower than your income tax rate.
- This helps reduce your taxable income through salary sacrifice.
Benefits of the FHSS Scheme
- Faster Savings: The scheme leverages super’s tax advantages, helping you save for a deposit more quickly.
- Tax Efficiency: Contributions are taxed at a lower rate, allowing your money to grow more efficiently.
- Restricted Access: Funds are locked in super until you’re ready to buy, reducing the temptation to spend.
How to Qualify
- Age and Ownership: You must be 18 and not have owned property in Australia.
- Intent to Live: You must intend to live in the property for at least six months in the first year.
- First-Time Applicant: You must not have previously accessed the FHSS scheme.
Financial Hardship Provisions
If you’ve lost ownership due to bankruptcy, separation, job loss, sickness, or natural disaster, you might still qualify for the scheme.
How the Scheme Works
- Voluntary Contributions: Make extra contributions to your super.
- Withdrawal: Withdraw the contributions plus investment earnings when ready to buy.
Contribution and Withdrawal Limits
- Contribution Limits: Up to $15,000 per year, $50,000 total.
- Withdrawal Limits: 100% of after-tax contributions, 85% of before-tax contributions.
Case Study: Michelle’s Scenario
Michelle earns $60,000 a year and wants to buy her first home. By contributing $10,000 of pre-tax income annually into her super account, she increases her balance by $8,500 a year (after the 15% contributions tax). After three years, she can withdraw $26,449, including expected investment earnings. After tax, she has $25,259 for her deposit, saving $5,840 more than a standard deposit account.
What If Plans Change?
You have up to 12 months to sign a contract to buy or build a property after the release of your scheme funds. If you haven’t signed a contract within that time, you can:
- Get an extension of up to 12 months.
- Put the funds back into your super account.
- Keep the funds, subject to a First Home Super Saver scheme tax equal to 20% of your assessable First Home amount, less any withheld tax.
How to Access Your Funds
- Eligibility Check: Ensure you’re eligible and your super fund can release funds for the FHSS scheme.
- Voluntary Contributions: Make extra contributions.
- ATO Application: Request a Determination from the ATO.
- Release Authority: Request a release authority from the ATO.
- Contract Signing: Notify the ATO within 12 months of signing a contract.
Tax Considerations
- Assessable Income: FHSS funds are part of your assessable income.
- Withholding Tax: The ATO withholds tax at your usual rate minus a 30% offset or 17%.
Need Guidance?
Navigating the FHSS scheme can be complex, but you don’t have to do it alone. At BFD Financial Planning we provide personalised guidance and can assist you in making the most of the FHSS scheme and achieving your dream of homeownership.
If you are looking for sound financial advice, contact us today. info@bfdfp.com
General Advice Disclaimer
The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.
Although, every effort has been made to verify the accuracy and correctness of information, BFD Financial Planning, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.
Steven Roberts
BFP Planning
