Saving to buy your first home?
Did you know that you can contribute money into your super to help you save faster for your first home?
Find out more about the new First Home Super Saver Scheme and whether it can work for you in the following article.
First Home Super Saver Scheme
The First Home Super Saver (FHSS) Scheme was introduced by the Australian Government in the Federal Budget 2017–18 to reduce pressure on housing affordability.
The FHSS Scheme allows you to save money for a first home inside your superannuation fund. This will help first home buyers save faster with the concessional tax treatment within super.
About the scheme
From 1 July 2017 you can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund to save for your first home.
From 1 July 2018 you can then apply to release your contributions, along with associated earnings, to help you purchase your first home. You must be 18 years or over to apply for the release of these amounts.
To qualify you must:
- have not previously owned property in Australia (or the Commissioner of Taxation has determined you have suffered a financial hardship as specified by regulations)
- have not previously released FHSS funds
- either live or intend to live in the premises you are buying as soon as practicable
- intend to live in the property for at least six months of the first 12 months you own it, after it is practical to move in.
You can apply for the release of voluntary contributions up to a maximum of $15,000 from any one financial year and $30,000 in total across all years.
Who is eligible
You can start making super contributions from any age, but can’t request a release of amounts under the First Home Super Saver (FHSS) Scheme until you are 18 years old.
You may be eligible for FHSS if you can answer yes to all of the following:
- You have never owned property in Australia – this includes an investment property, commercial property, a lease of land in Australia, or a company title interest in land in Australia.
- You are not using FHSS amounts to purchase the following type of property
- any premises not capable of being occupied as a residence
- a houseboat
- a motor home
- vacant land.
- You have not previously requested a FHSS release authority.
You may still be eligible even if you have previously owned property in Australia, if the Commissioner of Taxation determines that you have suffered a financial hardship. Regulations will be available prior to 1 July 2018 specifying the circumstances that the Commissioner is to consider when determining if you have suffered a financial hardship.
You must also still meet the age requirement and have not previously received FHSS amounts to be eligible even if we determine you have suffered a financial hardship.
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.
How you can save in super
You can contribute into any super fund. It is also possible to contribute into more than one fund.
Before you start saving:
- Check that your nominated super fund/s will release the money. (FHSS contributions may not be released from defined benefit interests or constitutionally protected funds.)
- Ask your fund about any fees, charges and insurance implications that may apply.
- Be aware that if you receive FHSS amounts, you will receive a payment summary. You will need to include the assessable amount in your tax return.
If you want to be considered under the financial hardship provisions then you should ask the Commissioner to determine if these provisions apply to you before you start saving.
Contributions you can make
You can make the following existing types of contributions towards the FHSS:
- Concessional contributions – including salary sacrifice amounts or contributions for which a tax deduction has been claimed. These are taxed at 15%.
- Non-concessional contributions – these are made after tax or where a tax deduction has not been claimed.
You can contribute up to your existing superannuation contribution caps.
When you are ready, you can apply for the release of your eligible FHSS contributions up to the following amounts:
- A maximum of $15,000 from any one financial year.
- A maximum of $30,000 in total across all years.
Making your contributions
When making your contributions into super, consider the order they will be counted. The order may affect your maximum release amount, remembering that you can withdraw 100% of your non-concessional (after-tax) amounts and 85% of concessional (pre-tax) amounts.
Your contributions are counted in the following order:
- A first-in first-out rule applies – this means that contributions you make in an earlier financial year are counted before contributions in a later financial year. Contributions you make within a financial year are counted in the order you make them.
- A simultaneous contributions rule applies – this means that if you make an eligible concessional contribution and an eligible non-concessional contribution at the same time (for example, in the same payroll process), your non-concessional contributions are taken to be made first.
- Where you make your contributions within a financial year and you claim a deduction for some or all of the contributions, the resulting eligible non-concessional contributions (if any) are taken to be made before any eligible concessional contribution.
Applying to release your savings
You may check your balance with your super fund/s at any time to see how much you have saved. This will help you keep track of the maximum FHSS amounts you can have released.
When you are ready, you need to apply to the Commissioner of Taxation for a FHSS determination and a release of your funds. You will be able to apply from 1 July 2018. You need to apply using the approved form that will be available on our website.
Note: You must have received released amounts from the FHSS before you sign a contract to purchase or construct residential premises.
Maximum release amount
The FHSS maximum release amount is the sum of your eligible contributions and associated earnings. This amount includes:
- 100% of eligible non-concessional contributions
- 85% of eligible concessional contributions
- associated earnings calculated on these contributions using a deemed rate of return – this is based on the 90-day Bank Bill rate plus three percentage points (shortfall interest charge rate).
Requesting a determination
To withdraw the voluntary super contributions and earnings you have made under the FHSS, you need to first request a determination from the Commissioner of Taxation. You can do this from 1 July 2018.
When you apply for a determination of your FHSS we will tell you:
- your maximum FHSS release amount
- associated earnings
- tax that needs to be withheld.
You can request a determination on more than one occasion.
You can then decide to apply for a release of your amounts if you are ready to purchase your home. But be aware that you:
- can only apply for a release once
- will need to confirm that you will not claim further tax deductions on the non-concessional contributions in this determination.
Requesting the release of your savings
Before you request a release of your savings, you:
- should check that you have made all of the voluntary FHSS contributions you want to make
- should make sure that you agree with the amounts shown in the determination. If not, you need to resolve any issues through our standard review processes for determinations before applying for a release.
- must be 18 years or over to request a release of FHSS amounts.
You can consent for the release of the FHSS maximum release amount stated in the determination, or choose a lower amount.
It will take approximately 12 business days to process your request.
Note: Once you have requested a release you can’t request another one.
Receiving your amount
The Commissioner of Taxation will issue a release authority to your fund/s and your fund/s will then send the requested release amounts to the ATO.
We will then:
- withhold the appropriate amount of tax, and
- send the balance to you.
A payment summary will subsequently be sent to you. This will show your assessable FHSS released amounts, which comprise:
- concessional contributions
- associated earnings on both concessional and non-concessional contributions.
You need to include this amount in your tax return for the year you request the release.
Withholding tax
When you receive the released amounts, we will withhold tax that will be calculated at either:
- your marginal tax rate less a 30% offset
- 17% if the Commissioner is unable to estimate your expected marginal rate.
Your payment summary will show the amount of tax withheld. You need to include this amount in your tax return for the year you request the release.
Completing your tax return
You must include the assessable FHSS released amount shown on your payment summary as assessable income in your income tax return. You show this for the year you made your request for release.
For example, if you request a release of FHSS amounts on 30 June 2019, include the amount in your 2018–19 income tax return. This is even though you won’t receive the released amount until July 2019.
Family tax benefit and child support
Your assessable FHSS released amount is not included in your assessable income for calculating family assistance and child support payments. This is because these amounts were included in prior years, and will prevent double counting.
After your savings have been released
Once your savings have been released, you have up to 12 months to sign a contract to purchase or construct a home.
If you do not sign a contract to purchase or construct a home within 12 months of receiving your FHSS amount, you can either:
- apply for an extension of time of up to a maximum of a further 12 months
- recontribute the amount into your super fund. This must be at least equal to your assessable FHSS released amount, less any tax withheld by the ATO
- keep the released amount and be subject to a FHSS tax. This is a flat tax equal to 20% of your assessable FHSS released amounts.
You must notify us if you either sign a contract to purchase or construct a home, or recontribute the amount into your super fund or you will be subject to this tax.
