First Home Super Saver Scheme (FHSSS) – A leg-up to home ownership for first home buyers?
It’s become a topic of daily conversation for many – the rising house prices in Australia and the impact on the first home buyer.
Whether it’s discussed in the media, at a family bbq, or at the local café, it’s a conversation that many are having. As house prices continue to rise, so do the concerns for the younger generations of whether it is becoming simply unattainable to afford to own your own home.
The Australian Government has introduced the First Home Super Saver Scheme (FHSSS) to assist first home buyers to save for a deposit. Will this be an effective solution to this very real issue? Let’s take a look…
What is the FHSSS?
It is a Government initiative introduced in the 2017-18 Federal Budget to help first home buyers save for a home deposit. It allows you to save money for a first home inside your superannuation fund. Due to the low rate of tax on earnings inside superannuation (15%) the idea is that it will help first home buyers save faster for their deposit.
How does it work?
From 1 July 2017 you can make both voluntary, before and after-tax contributions, into super to help save for your first home. You can contribute up to your existing superannuation contribution caps. From 1 July 2018 you can then apply to release your contributions together with an associated earnings amount (calculated by the ATO – not actual earnings) to assist with purchasing your first home.
How much can I withdraw?
A total of $30,000 can be withdrawn under the FHSSS, however only $15,000 each financial year can count towards this total. Within 12 months of the amount being released you must enter into a contract to purchase or construct a property.
So what’s the benefit?
- Pre-tax super contributions such as salary sacrifice and personal contributions where a tax deduction is claimed are taxed at 15% rather than your marginal rate of tax;
- The additional contributions made, earn income via your super fund investments;
- These investment earnings are taxed at 15% rather than your marginal rate of tax.
Will this be one of the answers to the ever-increasing housing affordability issue? Time will tell.
For those actively saving for a deposit this can be a great way to fast track the process so if you would like to discuss how this can apply to you, please contact your Allan Hall advisor on 02 9981 2300.