In this video as a part of my First Home Buyer series, I am going to be looking at the First Home Super Saver Scheme (FHSSS). What is it, how does it work and how do you qualify? Coming right up.
Hi, my name is Denis Flynn and I run a mortgage brokerage in Brisbane, DSF Mortgage Brokers.
We have connections throughout the finance industry and work with many clients just like you, who are trying to save as much money as possible when buying their first home.
If you find the content in this video useful, please leave a like and don’t forget to subscribe. If you know someone who is a first home buyer please forward this video on to them. Taking advantage of this scheme could potentially save them thousands of dollars and it is one more piece in the puzzle of becoming a homeowner.
What Is It?
The First Home Super Saver Scheme (FHSSS) was introduced in the 2017-2018 Federal budget and was intended to reduce pressure on housing affordability.
The scheme helps eligible first home buyers to save money for their first home from within their superannuation fund.
First home buyers can make a voluntary super contribution of up to $15,000 a year and $30,000 in total towards their home deposit.
Because it is saved within superannuation the savings are subject to a 15% tax rate rather than your higher marginal tax rate.
These voluntary contributions can subsequently be withdrawn to act as a deposit for your first home.
So how does it work?
It’s hard not to be confused by the complexity of the FHSSS. It is probably easier to use an example to illustrate the benefits.
Sarah, an aspiring first home buyer earns $82,000 a year before tax. She arranges with her employer to salary sacrifice an additional $15,000 per year into her superannuation.
Because her voluntary contributions are from her gross (i.e. before tax) income the actual reduction in her take home pay is $9,825 p.a. or $189 a week.
After 2 years Sarah has saved a deposit with the First Home Super Saver Scheme of $25,176. This is $5,268 more than if the saving had occurred in a standard savings account, where the tax benefit of the FHSSS wouldn’t have been applicable.
Additionally, when Sarah’s mortgage broker presents her finance application to her lender, he will reference Sarah’s contributions to the FHSSS to demonstrate a pattern of genuine savings on her behalf.
To be eligible to withdraw from superannuation under the FHSSS scheme:
- You must not have owned property in Australia before. This includes an interest in any property, not just owner occupied but includes investment and commercial property.
- Be aged 18 years or older. You can make voluntary contributions to super under the age of 18 but for funds to be released under the FHSSS you must be 18 or over.
- Have not previously had amount released from superannuation under this scheme. An individual can only withdraw from the FHSSS once. If you’re purchasing the property with another person, eligibility is determined individually, and provided that the criteria are met, it is possible for one person to be eligible to participate in the scheme where the other fails to qualify. For example, this might be the case where you wish to purchase a home with your spouse, but your spouse has previously owned an interest in a property, but you have not. You would still be able to access the scheme even though your spouse was ineligible.
Using the FHSSS does require some planning and it does take some time to accrue the maximum benefits from the scheme. Ultimately the scheme saves you some tax and forces you to save.
If you want to calculate your potential benefits the Commonwealth Superannuation Corporation provides a handy estimator which I will link below.
If you have any questions let me know in the comments below or if there are any other finance topics you would like me to cover in a future video let me know in the comments.
If you are in Brisbane and need residential finance please give me a call and lets see how I can help.
Now for the Disclaimer:
All information provided here is general in nature and is specific to an Australian audience and the Australian finance market.
Thanks for watching and see you next time.