Anyone saving for their first home is Australia knows how tough it is. That’s why it’s important to take advantage of everything you can.
Most people are aware the NSW Government will periodically offer various grants and stamp schemes to help people purchase their first home (if you’re not aware what’s available here’s a link First Home Buyer | Revenue NSW).
But one area we constantly see fly under the radar is the First Home Super Saver (FHSS) Scheme. Which is a shame because it’s an easy way to boost your deposit savings.
The way the FHSS works is by allowing first home buyers to make voluntary contributions to super, up to $15,000 per financial year and up to $50,000 total, that can then be later withdrawn to be used when purchasing a first home.
There are two big benefits here:
- If you make concessional contributions (such as salary sacrifice or personal deductible contribution) you get a tax deduction. This means your savings will only be taxed at the superannuation contribution tax rate of 15% rather than your marginal tax rate which for most people will be around 30% to 37%.
- Your savings in super will earn what’s called ‘deemed’ earnings. Basically, this means the ATO will calculate the interest you are entitled to, it doesn’t matter what your super fund performance actually is. The deemed interest rate is generally significantly higher than most savings account, it was 7.34% p.a. at the time of writing.
These benefits combine to provide a significant boost to your deposit savings. The Commonwealth Superannuation Corporation provides a helpful calculator to help you estimate how much better off you could be by taking advantage of the scheme.
It’s not uncommon for us to see clients benefit by $10,000 or more for essentially putting your savings in super rather than an everyday bank account.
If you are planning to buy a property with your partner, you can both utilise the scheme provided you both meet the eligibility criteria:
- You are at least 18 years old when requesting a determination or release (however, contributions before you 18 can still be withdrawn)
- You must be a first home buyer, having never owned property in Australia
- You intend to occupy the property as soon as practicable and for at least 6 months within the first 12 month you won it
- You have not previously made an FHSS release request
Some final tips:
- Before contributing extra to super, double check your super fund allows it but most do.
- If you’re making a contribution to super and want to claim it as a tax deduction (IE a personal deductible contribution) than make sure you complete the required forms with your super fund before you complete your tax return for that year.
- The best way to check how much you’ve contributed is through the ATO via MyGov. This is a good idea to do anyway as that’s how you request your withdrawal.
- What you withdraw doesn’t equal what you put in. That is because of some taxes and the deemed earnings. If you ever want to check, you can request a determination in the same place you check your contributions – just don’t apply to withdraw funds until you’re ready because while you have any many determinations as you like, you can only apply to release funds once.
- The ATO provides comprehensive information regarding how the scheme works here First home super saver scheme | Australian Taxation Office (ato.gov.au)
Disclaimer
Any advice is of a general nature and has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation, and needs. Please seek personal financial advice prior to acting on this information. This has been prepared and by Constellation Financial Planning Pty Ltd, a corporate authorised representative (CAR 1260791) of InterPrac Financial Planning Pty Ltd (AFSL 246638).
