What? Use your Super to buy a house? Since when are you allowed to do that!?
You may have heard of the First Home Super Saver (FHSS) Scheme, which was introduced in the 2017/18 Federal Budget, designed to help first-home buyers leverage their Super to save a house deposit. As of July 1st, 2022, individuals can withdraw a total of $50,000 from their Super if their previous contributions create the interest. For couples, this works out to be $100,000 that you can add to your home. Not half bad!
Here are the basics!
First home buyers can divert extra money into their Super (Capped at $15,000 per year), and then draw it out as a deposit on their first home. The maximum they can save is $50,000 individually, or, $100,000 as a couple.
If you’re looking at how much interest this could afford you within your Super, consider this; for an individual earning $65,000 a year, after three years of contributing to their Super using the FHSS scheme, they will have $6,314 more than if they’d saved via a normal bank account. For a couple, that’s $12,628 extra in savings!
How do I get started?
First – Check if you’re eligible.
To be eligible for the FHSS scheme, you must –
- Be aged 18 years or older
- Have never owned a house or property before
- Intend to live in the house you are buying for at least 6 of the first 12 months you own it
- Have not have previously requested a release of FHSS funds.
Ticked all the above boxes? Great! Now it’s time to start contributing.
Which contributions count?
When you’re ready to make your big purchase, you can apply to release up to $50,000 from your super, starting from any eligible contributions made from 1 July 2017. You will also receive the earnings that relate to those contributions.
There are two ways you can make voluntary contributions to your Super to count towards your home purchase –
Salary sacrifice – You can ask your employer to set aside a nominated amount from your before-tax income to instead go into your super. This will usually be an informal agreement made between yourself and your employer, however, most industry super funds have forms you can use to help with this process.
Voluntary Contributions – You can contribute to your super through BPay installments at any time.
How do I withdraw my contributions to buy a house?
When you’re ready to buy your first home, you can apply to release your savings with the ATO using a FHSS Determination through myGov, but you can only do this once. So, make sure you know the exact amount you want withdrawn. The ATO will then calculate the earnings on your contributions, then apply any tax, or relevant tax offsets. You must receive a FHSS determination before signing a contract.
After you have been deemed eligible for the FHSS Determination, you will then need to request a release of your savings, which you can again do through your myGov account.
What happens after?
Once your savings have been released, you have 12 months from the date you requested the release of FHSS amounts to sign a contract to purchase or construct your home. However, if you do not sign a contract within this time, you will be granted a further 12-month extension automatically by the ATO.
After you have signed a contract, you must notify the ATO within 28 days. Otherwise, you may be subject to FHSS Tax. You can notify the ATO by either phoning them on 13 28 61, or by logging into your myGov account.
So… what if I don’t buy a house after 24 months, or at all?
Sorry buddy, but you can’t keep the money. You will need to recontribute the equal amount of funds back into your Super. Furthermore, the ATO Commissioner must be notified that the contribution has taken place. This ensures that the individual does not receive a benefit from the concessions provided by the FHSSS where they did not purchase a home.
If, for whatever reason, you are unable to recontribute the equal amount back into your Super, a Super Tax will be imposed at 20% of the assessable FHSS released amounts.
Interested in reviewing your own situation in relation to the First Home Super Savers Scheme? Give Auditax Accountants a call on 08 9358 5599 and ask to speak with one of our Super Specialists to see if this is right for you.