Achieving the dream of owning your first home is a significant milestone, one that signifies financial stability and a place to call your own. However, with the ever-rising property prices and the cost of living, this dream can often seem like an insurmountable challenge. The First Home Super Saver Scheme (FHSSS) is a ray of hope for aspiring first-time homeowners in Australia.
The FHSSS offers a unique way to supercharge your savings for that first home, leveraging the benefits of the superannuation system. While the details may appear complex at first glance, this guide is here to simplify it all for you. We’ll walk you through the key aspects of the FHSSS, helping you understand if this scheme might be your ticket to homeownership.
1. Saving limits
Starting from July 1, 2023, you can take out up to $50,000 from your superannuation for the FHSSS. If you’re a couple, you can save up to $100,000 together. This amount includes your own contributions (not what your employer puts in) and the returns on those contributions.
2. Who’s eligible
To use the FHSSS, you can’t have owned property in Australia before, and you can’t have used the FHSSS before. You can start making contributions before you turn 18, but you can only withdraw the money after that.
3. How much you can contribute
Each year, you can put in up to $15,000 toward your FHSSS. But remember, your total contributions, including those for the FHSSS, must stay within the annual contributions caps.
4. Tax rules
If you contribute money through a salary-sacrifice arrangement or claim it as a tax deduction, there’s a 15% contribution tax applied when it goes into your super account.
5. Taxes when you take the money out
When you decide to use your FHSSS savings, the amount you take out will be taxed at your regular tax rate. But, you get a 30% tax offset to help reduce the tax bill.
6. How your money grows
The Australian Taxation Office (ATO) figures out the earnings on your FHSSS contributions using a specific formula. The calculation currently involves the 90-day bank bill rate plus a 3% margin. So it’s not tied to how the stock market is doing, like your regular super balance.
7. ATO decides
Your super fund doesn’t control the rules; the ATO decides which contributions count and how much you’ve earned. You need to get an FHSSS determination from the ATO before buying your home and taking out the money.
8. Be mindful of the regulations
Once you use your FHSSS savings, you must spend the money on buying a home, not an investment property. Using it for the wrong purpose can lead to taxes and extra reporting requirements.
9. Joint purchases allowed
The FHSSS is flexible. You can team up with someone, even if they’re not a first-time buyer, and use your combined FHSSS savings to buy a property.
10. Get the right advice
The journey to homeownership in Australia is a significant endeavour, and the rising property market can make it feel like an uphill battle. The First Home Super Saver Scheme (FHSSS) stands as a beacon of hope for first-time homebuyers, offering a unique and innovative way to bolster your savings. The ability to access up to $50,000 (or $100,000 for couples) from your superannuation is a substantial advantage in your quest for that first home.
However, it’s important to remember that the FHSSS has its set of rules and limitations, and it may not be suitable for everyone. Seeking professional financial advice is highly recommended to determine if this scheme aligns with your unique circumstances. Don’t hesitate to reach out to us to explore if the FHSSS is right financial strategy for you. We offer a complimentary, no obligation initial consultation so you can take a step closer to making your dream of homeownership a reality.
Parker is passionate about helping clients kick their financial goals and live a great life. Read his full bio here.
