Saving enough for a deposit to purchase your first home is not easy. And current housing affordability only adds to the strain. The government has responded by allowing first home buyers to use their super fund to help speed up the process.
The FHSSS applies to all additional contributions made to super after 1 July 2017 and is eligible for withdrawal after 30 June 2018. Only those that have not owned a house before can access the scheme.
Additional contributions include all after tax contributions as well as any additional before tax contributions such as salary sacrificed contributions. They do not include your standard SG contributions made by your employer.
The maximum additional amounts that can be contributed under the scheme each year is $15,000 with a lifetime maximum of $30,000. You must still consider the normal annual contributions limits.
The ATO deem these contributions to have earned 3% returns above the 90 day bank bill rate. This is regardless of the actual returns on the contributions. You can check your balance with your super fund at any time.
When you think you have saved enough and are ready to withdraw your FHSS amounts you need to apply to the ATO for a determination. This can take 12 days for the ATO to process and a further 25 days for your super fund to release the amount.
Remember that the amounts withdrawn will be taxed at your marginal tax rate less a 30% offset.
After your fund has released your contributions and deemed earnings you have 12 months to sign the contract for purchase or construction of your new home.
Let’s look at Georgina. Georgina earns $60,000 a year and decides to salary sacrifice $10,000 of her pre-tax income to her super. This increases her member balance by $8,500 after contributions tax has been paid by her fund.
After three years Georgina is able to withdraw $27,380 of contributions and deemed earnings. The withdrawal is taxed at her marginal tax rate less a 30% tax offset. After paying $1,620 on the withdrawal Georgina has $25,760 that can be put towards her first home. This is $6,240 more than if she had saved in a standard deposit account.
Check out the ATO Fact Sheet for more information or contact us here to see how we can help.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.