First Home Super Saver Schemes – Nfinity Financials

When the time comes to purchase your first home, you may be able to take out a portion of your superannuation contributions thanks to the First Home Super Saver Scheme.

Typically, government support in buying a home focuses on increasing deposits, which makes sense given that saving up the necessary funds is frequently the most difficult challenge for first-time home purchasers.

CoreLogic statistics show that the national median house price was $786,000 in May 2024. To purchase a house at that price with a 20% deposit, a buyer must save at least $157,200.

Of course, a buyer does not always need a 20% deposit. However, this is frequently the amount necessary to avoid paying Lender Mortgage Insurance (LMI) charges.

While the First Home Guarantee is intended to help you buy a property with a lesser deposit, the First Home Super Saver Scheme allows you to build your deposit while also saving you money on taxes.

It permits you to withdraw your voluntary superannuation payments to purchase your first house. This is how it works.

Let’s begin with “What is the First Home Buyer Super Saver Scheme”?

FHSS: What is it?

First-time homebuyers can save their deposit in their super fund using the First Home Super Saver (FHSS).

Superannuation contributions are often non-refundable until the individual reaches “preservation age,” which is typically 60 years of age.

However, when they want to purchase their first house, Australians who have never owned property before can take back all or part of their voluntary payments under the FHSS.

Currently, you can withdraw up to $15,000 of your super contributions—up to a maximum of $50,000—as well as any related profits, from inside any given fiscal year.

Superfund investment income is typically subject to a 15% tax.

It’s crucial to understand that if you use the FHSS, you may only withdraw additional funds that have been deposited; you cannot take out money that your company has contributed to your super fund. Moreover, superannuation payments made before July 2017 are non-refundable.

Each member of a couple, sibling, or group of friends purchasing real estate jointly can receive their own FHSS contribution. If you meet the eligibility requirements, you may be able to use the FHSS even if your co-buyer has prior real estate ownership.

Moving ahead we will talk about the benefits of the First Home Super Saver Scheme(FHSS).

First Home Super Saver Scheme Benefits

There are two good reasons to save in a superfund for a down payment on a home.

First of all, since super contributions are typically taxed at a rate of 15%, making super donations a great way to retain more of your money in your pocket. I’ll give you an example.

Think about a person who makes $100,000 a year before taxes. For the fiscal year 2024–2025, their highest marginal tax rate is 30% (30 cents for every $1 earned over $45,000).

They may go to their employer and agree to contribute $10,000 per year to their superannuation, which would mean that their take-home paycheck would be $10,000 lower that year.

Since the $10,000 payment is 15% taxable, $8,500 of it goes into their super account and the remaining $1,500 is taxed.

If the money had only been given to the worker, the ATO would have required $3,000 in taxes, leaving just $7,000. Our hypothetical employee just saved $1,500 in taxes that they otherwise would have had to pay, money that they may utilise to eventually purchase their first house.

Will you be taxed when making an FHSS withdrawal?

To go even more specific, you can take advantage of a 30% FHSS tax offset on the amount you withdraw under the schemes.

Super withdrawal tax is a complex topic, with several variables that affect whether and how much tax you pay when taking money out of your account.

However, any taxes owed are mitigated by 30% when taking out FHSS withdrawals.

Let’s take an example where you are taking out $10,000 in one single payment. Normally, a 2% Medicare levy would be added to the tax deducted at your marginal tax rate, let’s say 30%. However, just 2% of this would be retained after the tax offset.

The withdrawn money will be subject to a 17% tax rate if the ATO is unable to ascertain your marginal tax rate.

How to apply for the First Home Saver Scheme?

Of course, you have to have been adding more money to your super account before you can use the FHSS.

Before you start making optional superannuation payments, it’s a good idea to check in with your superfund since there’s a potential it won’t release the money when you go to purchase.

Remember that you can only take up to $50,000 in total from deposits made during any one fiscal year, not more than $15,000. Therefore, you would only be allowed to take $15,000 if you deposited $45,000 in a single year. However, if you put in $15,000 annually for three years, you would be able to withdraw $45,000 as well as any related earnings.

The procedures for requesting a release under FHSS are as follows:

Request an FHSS Determination

Make sure you apply for this before agreeing to any real estate terms. You will now be informed of the maximum amount that you can withdraw.

Make an FHSS Release Request

Either before or within two weeks after signing a real estate deal, this stage can be completed. Even if your request is approved after that time, you will still be required to pay FHSS tax, which is a fixed rate equal to 20% of the amount released. Verify the accuracy of all the information you submit, including your contributions, your claimed total amount, and your tax deductions.

Notify the ATO

You have 28 days from the day you sign a contract to buy or build a property to inform the ATO. You will have to reveal the address of the property as well as the date that you signed the contract. You will be liable for FHSS tax if you neglect to inform the ATO.

Sit Back & Wait

Typically, it takes 15 to 20 business days for the money from your super fund to be sent to the bank account of your choice.

Who Is Eligible For The FHSS Scheme?

To benefit from the scheme, you must meet a few qualifying requirements:

• To request an FHSS determination or the release of sums under the FHSS, you must be at least eighteen years old. On the other hand, you may begin making qualified contributions before reaching the age of eighteen.
• A property in Australia cannot be owned by you before applying for this scheme. This covers land ownership as well as Investment or business real estate.
• You are not eligible to apply for money release under the FHSS scheme already. However, people who ask for a release and subsequently withdraw their application will be able to reapply in the future thanks to modifications made in late 2024.
• You must move into the property you ultimately purchase as soon as it is practicable and must spend at least six of the first twelve months there.
• The FHSS plan isn’t meant to be used for buying empty land, but it can be used to build a house on unoccupied property as long as you didn’t buy the site before requesting an FHSS determination. Within a year of your request for an FHSS release, the contract to build the house must be signed.

Do you meet the requirements for financial hardship provisions?

You may qualify for the scheme even if you have owned property in the past if the ATO finds that you went through a financial difficulty that caused you to lose possession of that property.

This can assist someone in their financial recovery following events like insolvency, divorce, job loss, sickness, and natural disasters.

Applying for financial hardship is possible via myGov. When submitting your FHSS scheme decision form, you must further fulfil the following conditions if the ATO finds that you have experienced a sufficient hardship:

• You cannot have obtained another stake in real estate since you lost your first property as a result of financial hardship.
• You have to be at least 18.
• It must be the first time you have requested an FHSS release.

First Home Saver Schemes Contribution

Contributions to the FHSS can be given in smaller, partial sums or as a single donation. Under the FHSS Scheme, two primary categories of contributions can be withdrawn:

Concessional Contribution

All of your non-taxed income is a concessional contribution. This covers after-tax contributions or salary sacrifice for which you plan to file a tax deduction.

The tax rate for concessional donations is 15%.

Non Concessional Contribution

Non-concessional contributions are sums for which you have already paid taxes, as you may presumably guess. A non-concessional contribution is one that you contribute from your after-tax income if you do not claim a tax deduction and are taxed at your marginal rate.

There is no tax on these contributions.

To deposit a house, how much super may you withdraw?

You may only access a maximum of $15,000 of your contributions—up to a total of $50,000—under the FHSS in any given fiscal year, together with any related profits.

You may withdraw all of your qualifying non-concessional contributions, up to these maximum amounts. But the maximum amount of money you may take out of your concessional payments is 85%.

Tax is withheld on an FHSS withdrawal based on your Medicare plus marginal tax rate less the 30% offset.

FAQ’s

What happens if, after seeking a withdrawal, I am unable to purchase a house within a year?

When you sign a property contract, the ATO will immediately send you a written notice of extension that lasts for a full year.

You have up to 24 months from the day you asked to withdraw the FHSS amount to sign a property contract to re-contribute your super fund.

Can I combine FHSS with other government schemes?

Using other state or federal purchasing programmes won’t impact your eligibility for FHSS.

This implies that your state or territory may allow you to combine the First Home Guarantee with a First Home Owner Grant provided by the FHSS.

Once I apply for FHSS, how can I let the ATO know that I’m signing a property contract?

Using my Gov, you may alert the ATO when you buy real estate. You have 28 days from the day you signed the contract of sale to contact the ATO.

Book a free consultation call to see how the First Home Buyer Saver Scheme is beneficial for you.

We can help you: 

1. Understanding the conditions for eligibility for FHSS.
2. Determining how much you can contribute and withdraw.
3. To figure out if the FHSS is the best strategy for your situation.
4. Exploring other options for saving for a home loan deposit.

We can assist you in managing the FHSS’s intricacies and making wise financial decisions going forward. For more detailed information Read our related Articles or Book a consultation call with us at 1300 GET LOAN.