To assist first home buyers in entering the property market, the Government announced the First Home Super Saver (FHSS) Scheme in the 2017 Federal Budget. As of 13 December 2017, this scheme was legislated and became law.
Through this scheme, first home buyers are encouraged to use superannuation as another form of maximising their savings to secure the purchase of their first home.
What is the FHSS scheme?
From 1 July 2017, first home buyers could begin making voluntary concessional (before tax) and non-concessional (after tax) contributions into super for the purpose of purchasing their first home.
You can contribute up to $15,000 per year, to a maximum of $30,000 under this scheme.
Withdrawals towards a new home are allowed from 1 July 2018 and will be taxed at your marginal tax rate less a 30% tax offset. The maximum amount that can be released from your superannuation fund is the amount you contributed plus associated earnings*.
*The amount of earnings that can be released will be calculated using a deemed rate of return based on the 90-day Bank Bill rate plus three percentage points.
Who can qualify?
- be 18 years or older;
- have not previously owned property in Australia (or the Commissioner of Taxation has determined you have suffered a financial hardship as specified by regulations);
- have not previously released FHSS funds;
- either live or intend to live in the premises you are buying as soon as practicable; and
- intend to live in the property for at least 6 months of the first 12 months you own it, after it is practical to move in.
How do I start contributing under this scheme?
You can make voluntary contributions into your superannuation fund with the intention of using that money for a home deposit, as either a concessional contribution (before tax) or a non-concessional contribution (after tax). It is important to note that these contributions must be within the existing superannuation contribution limits.
When can I start contributing under this scheme?
The FHSS scheme will apply to voluntary superannuation contributions of up to $15,000 per financial year and $30,000 in total (or $60,000 in total for an eligible couple) made from 1 July 2017 onwards.
How much can I withdraw under this scheme?
The maximum amount that can be released from your superannuation fund under this scheme is the amount you contributed plus associated earnings*. This includes:
- 100% of eligible non-concessional contributions;
- 85% of eligible concessional contributions; and
- associated earnings which are calculated using a deemed rate of return based on the 90-day Bank Bill rate plus three percentage points.
You must include the released funds as assessable income in your income tax return. You show this for the year you made your request for release. If you are unsure what amounts to include or which tax year you should include, our specialist accounting team will be able to advise you accordingly.
How long would I have to buy a home?
You have 12 months after your funds are released to sign a contract for your new home or construct a new home. If you fail to do so, you can apply for an extension for a further 12 months.
What if I didn’t end up buying a home?
Under the FHSS scheme, if you don’t end up buying your new home, you must:
- recontribute the amount into your superannuation fund (this must be at least equal to your assessable FHSS scheme released amount, less any tax withheld by the ATO); or
- keep the released funds and be subject to a “FHSS scheme tax”.
The FHSS scheme tax is a flat tax equal to 20% of your FHSS released amounts.
It is important to know that you can only apply for a release once under this scheme. Once you have recontributed the amount or paid the FHSS scheme tax you cannot apply for a release again at a later date.
What should I do?
If you are not sure if you are eligible for the FHSS scheme or are interested in more information about this scheme and how it works for your circumstances, please contact us for more details.
McQueen Financial Group is a corporate authorised representative of Total Financial Solutions Limited. AFSL No. 224 954, ABN 94 003 771 579.
This information is of a general nature only and does not take into account your investment objectives, financial situation or particular needs. You should not act on any information in this report without first consulting a professional investment adviser in order to ascertain whether the information and any investment decision is appropriate. This information is believed to be accurate however no warranty of accuracy or reliability is given in relation to any advice or information contained, and neither TFSA or its Representatives and officers, agents or employees of either of the aforementioned shall not be held liable for any loss or damage whatsoever arising in any way for any representation, act or omission, whether express or implied (including responsibility to any persons by reason of negligence).