Legislation has passed that will enable eligible first home buyers to save for the deposit in the concessionally taxed superannuation system, using the First Home Super Saver Scheme (FHSSS or scheme).
This scheme may help participants to accumulate a larger deposit when compared to saving outside super.
The Government has produced an online estimator to illustrate the potential benefits of using the FHSSS. It compares making pre-tax super contributions with saving the same amount (less tax at personal rates) in a standard deposit account.
The estimator can be found at www.budget.gov.au/estimator/
Contributions can be made to the scheme from 1 July 2017 and withdrawn from 1 July 2018.
What and how much can you contribute?
Only voluntary contributions you make to super will count towards your FHSSS balance.
Voluntary contributions include personal, salary sacrifice and additional employer contributions, but not compulsory employer contributions (such as Superannuation Guarantee) and certain other amounts.
Voluntary contributions are limited to $15,000 per year and a total of $30,000. These contributions also count towards the existing contribution caps.
How much and when can you withdraw?
Withdrawals are capped at $30,000 plus associated earnings. The Australian Taxation Office (ATO) will calculate the associated earnings based on a formula, not the actual earning rate. They will also determine the amount that can be released after allowing for applicable taxes.
You can withdraw from the scheme before you have found a place to buy, but you’ll need to buy within 12 months of withdrawing. If not, the ATO may grant a 12 month extension.
Who can participate?
To participate in the scheme, you generally need to be aged 18 or over, have not used the scheme before and have never owned real property in Australia. You may still be eligible if you plan to purchase a home with a partner who doesn’t meet the criteria.
What can you buy?
You must buy a ‘residential premises’ with any amount withdrawn using the FHSSS. This includes vacant land if you’re planning to build. The premises has to become your home (not an investment property) and you need to occupy it for at least 6 months after you buy or build it.
What happens if you don’t buy?
If you don’t buy within the required timeframe, you can contribute the released amount back into super or keep the money and pay tax equal to 20% of the assessable amount.
Could you benefit from the FHSSS?
We can help determine whether saving for a home deposit using the FHSSS is a suitable option for you and assess other options.
Important information and disclaimer: Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.
While it is believed the information in this publication is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, accept any responsibility for errors or omissions in this document.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.