In today’s economic climate, young people face numerous challenges when it comes to saving for their first home. Rising property prices, and the high cost of living make it increasingly difficult to accumulate the necessary funds for a deposit. However, the First Home Super Saver (FHSS) Scheme offers some potential assistance. This scheme provides a tax-effective way to save for a home deposit, making it an option worth exploring for aspiring homeowners.

The FHSS Scheme is a strategic initiative designed to help first-time home buyers save for their first home more efficiently. By allowing prospective homeowners to make voluntary contributions to their super fund, the FHSS Scheme can provide tax benefits and a structured savings plan. This article will explore the key aspects, eligibility criteria, and benefits of the FHSS Scheme, offering valuable insights for those considering using the scheme to realise their homeownership dreams.

Overview of the FHSS Scheme

The First Home Super Saver (FHSS) scheme allows individuals to make personal voluntary contributions into their super fund to help save for their first home. Concessional contributions are taxed at only 15%, which could be less than your marginal income tax rate. Assessable FHSS amounts also benefit from a 30% FHSS tax offset.

You can withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings. You don’t need to be an Australian citizen or resident for tax purposes to use the FHSS scheme.

Purpose and Benefits

The primary purpose of the FHSS Scheme is to provide a tax-effective way for first home buyers to save for their deposit. The key benefits include:

• Tax Advantages: Contributions are taxed at a lower rate, and withdrawals receive a tax offset.
• Structured Savings: Encourages disciplined saving within a super fund environment.
• Higher Savings Potential: Potentially higher long-term returns compared to traditional savings accounts.

Eligibility Criteria

The FHSS Scheme can be used to purchase or build residential property in Australia for you to live in as your first home. Eligibility is assessed on an individual basis. This means that couples, siblings, or friends can each access their own eligible FHSS contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.

To use this scheme, you must meet several conditions. Firstly, you need to be at least 18 years old when requesting a First Home Super Saver (FHSS) determination. Additionally, you must be a first home buyer, meaning you have never owned property in Australia. Your name must also be on the title of the property you purchase. Lastly, you should not have a completed release request related to an FHSS determination made for you.

How the FHSS Scheme Works

Eligible Contributions

Under the FHSS scheme, you can only access eligible contributions made on or after 1 July 2017. These eligible contributions include voluntary concessional contributions, voluntary non-concessional contributions, and certain KiwiSaver and other transfer amounts from foreign super funds.

Ineligible Contributions

The following contributions are not eligible under the FHSS scheme: contributions made before 1 July 2017, super guarantee (SG) contributions made by your employer, contributions to defined benefit interests or constitutionally protected funds, mandated employer or member contributions made for you under an award or industrial agreement, and member contributions made for you by your spouse, parent, or other friends or family.

It is important to note that Super SA Triple S is a constitutionally protected fund.

How Much You Can Access

The amount you can access under FHSS is limited to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings.

Maximum Release Amount

The ATO confirms that the FHSS maximum release amount is the sum of your eligible contributions, taking into account the yearly and total limits, and associated earnings. This amount includes:

• 100% of your eligible personal voluntary super contributions you haven’t claimed a tax deduction for (non-concessional contributions)
• 85% of your eligible salary sacrifice contributions (concessional contributions)
• 85% of eligible personal voluntary super contributions you’ve claimed a tax deduction for (concessional contributions)
• Deemed earnings associated with these contributions

How to Request Your Contributions

• Step 1: Request a Determination

Log in to ATO online services through myGov. If you don’t have a myGov account, create one and link it to the ATO. Select Super, then Manage, then First home saver. Complete the determination request form, ensuring all details are correct. You need a determination before you can request a release

• Step 2: Request the Release of Your Super Savings

Once you have a determination and are ready to access your FHSS amount, request a release. Provide the necessary information, including the amount to be released, the super fund(s) to release from, and the bank account for payment. You can request any amount up to your maximum release amount.

• Step 3: Signing a Contract for a Home and Notifying the ATO

Sign a contract to purchase or construct a home within the specified period after requesting your FHSS release amount. Notify the ATO within 90 days (or 28 days for determinations made before 15 September 2024) of signing the contract. If you recontribute the assessable FHSS amount into your super fund, notify the ATO within 12 months of the release request.

• Step 4: Receiving Your FHSS Amount

After making a valid release request, the ATO will issue a release authority to your super fund(s). The fund will send the FHSS release amounts to the ATO, who will withhold the appropriate tax and offset any outstanding debts. It usually takes 15 to 20 business days to receive your money. You’ll get a payment summary at the end of the financial year, showing your assessable FHSS released amount and any tax withheld.

The FHSS scheme offers a valuable opportunity for first-time home buyers to save for their first home in a tax-effective manner. However, the scheme’s complexity means it is essential to fully understand the eligibility criteria and conditions of release. For personalised advice and to determine if the FHSS scheme is right for you, we recommend talking with us. Our team is here to help you navigate the process and maximise the benefits of your savings.

This general advice has been prepared without taking account of your objectives, financial situation or needs. You should consider the appropriateness of this advice before acting on it. If this general advice relates to acquiring a financial product, you should obtain a Product disclosure Statement before deciding to acquire the product.