Saving for a deposit is now the biggest hurdle for aspiring first home buyers due to numerous challenges that are affecting their ability and rate of saving.
In this article we take a look at the less popular scheme to help first home buyers overcome this challenge.
What is the First Home Super Saver Scheme?
In layman terms, this scheme allows you to make contributions into your super from your salary so you can reduce the amount of tax you pay and then have it released when you need to purchase a first home.
Why would I use the First Home Super Saver Scheme?
As an example, when you save for a deposit, you’re doing this with after tax money. Depending on your tax rate, let’s say if it was 30%, you will be able to half the amount of tax you pay by using this scheme because the money that is contributed into your super is only taxed at 15%.
You can contribute up to $15,000 each financial year to be released under the scheme for when you need to purchase the property.
You can contribute up to a $50,000 across all financial years and have it released to use as a deposit.
Do I earn any interest or return on the money I contribute to my super under this scheme?
The cherry on top is that you will also receive the associated earnings on this money you put into your super when released. The rate of this earning is calculated based on the shortfall interest charge (SIC) rate, and not on the actual earnings on those contributions in your superfund from the investments. The rate of earning is published every 3 months by the ATO and the latest for January to March 2024 is sitting at 7.38% per annum. This is a pretty good rate of return compared to putting money away in a savings account if you ask me.
What are the eligibility criteria for the First Home Super Saver Scheme?
- You’re 18 years old or older when requesting a FHSS determination or a release of money under the FHSS scheme. However, you can make eligible contributions before you are 18 years of age.
- You’re a first home buyer, having never owned property in Australia – this includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia (unless we determine you have suffered a financial hardship).
- You intend to occupy the property you buy as soon as practicable and for at least 6 months within the first 12 months you own it after it’s practical to move in.
- You have not previously made a FHSS release request.
Am I still eligible for this if my partner is not a first home buyer?
Unlike other first home buyer schemes or grants that require everyone to be a first home buyer, this scheme is assessed on an individual basis so if your partner is not a first home buyer, it does not stop you being eligible for this scheme to speed up saving for a deposit towards your first home.
How do I get started with this scheme?
Check with your nominated super fund that they will release the money for this purpose
Ask your fund about any fees, charges and insurance implications that may apply
Check that your super fund has your current contact details – ensuring your name and address in their records match the details the ATO have for you
You can ask your employer to enter into a salary sacrifice arrangement to make the voluntary concessional contributions (not that not all employers offer salary sacrifice arrangements to their employees)
You can also make voluntary personal super contributions, which will be concessional if you claim an income tax deduction for them
Make sure you do not exceed the limit of $15,000 for each financial year (1 July to 30 June) and ensure it doesn’t exceed $50,000 in total across the multiple financial years.
How do I release my First Home Super Saver Scheme?
You need to apply to the ATO for a FHSS determination by:
- Sign into your myGov
- Select Australian Taxation Office
- Select Super, then Manage, then First home saver
Please note – you must have a FHSS determination before you sign a contract to purchase a property.
When can I sign the contract to purchase a property?
You can sign a contract to purchase your home before or after you make a request to release your FHSS. However, it is very important to remember that you must request a determination before you sign the contract. Requesting a determination and requesting a release are two separate things.
To find out all there is to know about this scheme, make sure you check out the ATO website with the latest information First home super saver scheme | Australian Taxation Office (ato.gov.au)