The FHSSS was introduced by the government in 2017 to help first-time homebuyers save for a deposit by making voluntary contributions to their superannuation fund. These contributions are taxed at a lower rate and can be withdrawn from the super fund when the buyer is ready to purchase their first home.
The FHSSS has undergone a few changes since it was first introduced, as of July 2022 the maximum amount that can be released increased to $50,000.
The primary advantage is that you can make pre-tax contributions and withdraw at a rate of 85%. This will then be considered ‘genuine savings’ by the banks and can be used as your home loan deposit.
It’s also a great option for those savers that have a habit of dipping into their savings, as once this is set up it will happen automatically, and you won’t be able to access again until you’re ready to buy a home.
What are the FHSSS eligibility criteria and guidelines?
To be eligible for the FHSSS, you must meet certain criteria, such as:
- being over 18 years old
- not having previously owned a home in Australia
- unless you are eligible under the ‘financial hardship provision’ – which you should determine before you start saving
- occupy the premises you buy, or intend to as soon as possible
- move in for at least 6 month of the first 12 months after buying
Guidelines for the withdrawal:
- compulsory employers’ contributions and spousal contributions are not eligible
- additional contributions made before 01/07/2017 are not eligible
- voluntary concessional (pre-tax) contributions can be withdrawn at a rate of 85% of the contribution
- non-concessional (post-tax) contributions can be withdrawn at 100%
- you can withdraw up to $15,000 of your additional contributions per financial year, and a total of $50,000. You will also receive any earnings that relate to these contributions.
The process for getting your FHSS release
First, you’ll have to set up your additional contributions. Note: you do not need to specifically set them up for the First Home Super Saver Scheme – so any previous additional contributions you’ve made may be eligible. Ideally, you would set up a salary sacrifice arrangement through your employer to make pre-tax additional contributions. Some employers do not offer this, in which case you can make post-tax contributions directly with your Superannuation fund.
You then must apply for an FHSS Determination. You can do this via your ATO portal in MyGov. After applying for a Determination, you’ll be provided a letter from the ATO to confirm the exact amount you’re able to withdraw. You can use this letter as proof-of-savings for your home loan application.
Once you have your determination, you can apply for a pre-approval. This is an optional step – you can instead go straight into purchasing a property and applying for a formal approval. The home loan process won’t be any different to normal, but you can use your Determination as proof of your deposit – this will also be considered ‘genuine savings’.
Finally, you can purchase a property and prepare for settlement. Once you’ve signed your contract, you’ll need to apply to the ATO to release your Super Saver Determination amount whilst simultaneously finalising your home loan approval. The FHSS amount will be deposited into your bank account within 25 business days, which can then be used to finalise the settlement.
How concessional superannuation contributions work
Concessional Superannuation contributions are beneficial because they are taxed at only 15% instead of your income tax bracket. Concessional contributions include employer contributions, but only your additional contributions can be used for the Super Saver Scheme – not compulsory or additional employer contributions.
The current cap for concessional contributions is $27,500 per annum. Any amount over this will be a non-concessional contribution and taxed at your income bracket.
Overall, the FHSSS is designed to help first home buyers save for a deposit in a tax-effective way and can be a useful tool for those looking to enter the property market. Using this scheme also does not affect your eligibility for other Government First Home Buyers incentives, so it’s worth looking into the other available schemes as well.
If you’re considering using the FHSSS to save for a first home or help family save, it’s important to do your research and speak to a financial adviser to ensure that it’s the right option for your individual circumstances.