So it's a good thing that several government schemes can make this task a little bit more bearable — the First Home Super Saver (FHSS) scheme is one.
The federal government rolled out the First Home Super Saver Scheme in 2017, with the aim of helping first-home buyers break into the property market sooner. The scheme allows first-home buyers to save money for their deposit faster by taking advantage of their super fund.
How does the First Home Super Saver Scheme work?
The First Home Super Saver Scheme allows first-home buyers to save money inside their super fund for the purpose of purchasing a new or existing home.
The scheme allows couples, siblings, or friends to each access their own eligible First Home Super Saver Scheme contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying for the scheme.
With the First Home Super Saver Scheme, you will be able to save up to $15,000 in any one financial year and up to a maximum of $50,000 across all financial years.
You will also be able to receive an amount of deemed earnings related to the contributions made under the scheme.
Types of contributions
Under the scheme, you will be able to make either of these types of contributions:
- Salary sacrifice: These are pre-tax contributions that are made under an agreement between you and your employer. You will have to arrange this with your employer.
- Personal voluntary contributions: You can directly make contributions to your account, or you can use your after-tax pay. For this one, you will need to contact your super fund to find out how to do this. You can also ask your employer about making contributions directly from your after-tax pay.
When discussing with your employer, you must ensure how often they make salary sacrifice contributions or contributions from your after-tax pay to your super fund. To count for First Home Super Saver Scheme, contributions must be deposited into your super fund account.
While you can make smaller but regular contributions, you are also allowed to make contributions in lump sum — for instance, you can choose to put in $15,000 yearly into your super account.
How much can you withdraw?
As mentioned earlier, the number of eligible contributions that can count towards the maximum releasable amount under First Home Super Saver Scheme is $50,000. Yearly, you can only contribute a maximum of $15,000.
With these in mind, you can withdraw 100% of your eligible personal voluntary super contributions you have not claimed tax deduction for. These are the non-concessional contributions.
Meanwhile, you can only get 85% of your eligible salary sacrifice contributions and 85% of eligible personal voluntary super contributions you have already claimed a tax deduction for.
According to the ATO, it will withhold tax from the amount you receive to help you meet your end of year tax liabilities.
Take note that for most people, tax will be calculated at the expected marginal tax rate, including Medicare levy, less 30% offset. For instance, if your tax rate is 39% including Medicare levy, the ATO will withhold 9% tax.
Who is eligible for the First Home Super Saver Scheme?
Just like any other government support schemes, you need to meet a set of eligibility requirements:
- You should be at least 18 years old to apply for the release of your super contributions.
- You should have never owned a dwelling, including an investment property, in Australia.
- You can only take advantage of the scheme once.
- You must live in the property for at least six of the first 12 months after purchase.
Eligibility is assessed on an individual basis. According to the Australian Tax Office (ATO), this means that couples, family members, and friends can each access their own First Home Super Saver Scheme contributions for the purchase of the same property.
Are you qualified for financial hardship provision?
Even if you previously owned a property, you can be eligible for the scheme if the ATO determines that you were under financial hardship that resulted in you losing ownership of the property.
These financial hardship events include bankruptcy, divorce, loss of employment, illness, natural disaster.
You can apply for financial hardship provision through myGov. Once accepted, you must also meet the following requirements at the time you lodge your First Home Super Saver Scheme scheme determination form:
- You must not have acquired subsequent interest in real property from the time you lost your initial property due to a financial hardship event.
- You must be at least 18 years old.
- You must not have previously made an First Home Super Saver Scheme release request.
How can you apply for the First Home Super Saver Scheme?
Here are the steps to apply for a super contributions release under First Home Super Saver Scheme:
- Log into your myGov account and your linked ATO account and find the First Home Saver.
- Request for an First Home Super Saver Scheme determination. You must make sure that you apply for this first before signing any property contract. In this step, you will be able to see the maximum amount you can withdraw.
- Make a First Home Super Saver Scheme release request — ensure that your determination amount is correct before requesting for release. You will have to check all information including your contributions and tax deductions. Once approved, your First Home Super Saver Scheme amount will be paid into your nominated bank account around 15 to 20 business days.
- You will have to notify the ATO through myGov within 28 days after you have signed a contract to purchase or construct your home. You will be required to disclose the date you signed the contract as well as the address of the property. Failure to notify ATO will result in you having to pay First Home Super Saver Scheme tax.
How can you withdraw your funds?
The order and type of your contributions affect the amount that can be released to you under the First Home Super Saver Scheme scheme. According to the ATO, there are "ordering rules" that must be followed to maximise the amount available to you for release. These have direct impact on the calculation of associated earnings and taxation.
Before applying for the release of your savings you should check with your super fund to confirm how much you have already saved. Once you are ready, you should apply for the release of your savings through ATO.
It is also important to understand that with the First Home Super Saver Scheme, ATO will be in charge of deciding what super contributions count toward the scheme. It will be the one to advise your super fund on the amount that can be released to you when you submit an application.
You should start requesting the release of your First Home Super Saver Scheme around the same time that you commence your home-buying journey. You must apply and receive a First Home Super Saver Scheme determination from the ATO first before signing any home-purchase contracts. After signing the contract, you have 14 days to apply for the release of your money. It could take up to 25 business days after application before you can receive your money.
Frequently Asked Questions about First Home Super Saver Scheme
What if I am not able to buy a property within 12 months after requesting for a withdrawal?
The ATO will automatically provide a written notice of extension spanning 12 months for you to sign a property contract. The maximum time you have to sign a property contract of recontribute your super fund is 24 months from the date you requested to withdraw the First Home Super Saver Scheme amount.
Will I be able to use other government schemes with First Home Super Saver Scheme?
Yes — take note that your eligibility for First Home Super Saver Scheme will not be affected if you use other state or federal purchasing schemes.
How can I notify the ATO about the signing of the property contract after applying for First Home Super Saver Scheme?
You can notify the ATO by logging through myGov. You must do so 28 days after signing the contract.
This article was originally written on 27 September 2020 and updated on 15 November 2022.