Feb 27, 2018  | Tags: FHSSS, property, home loan

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New legislation has provided a window of opportunity for those who may otherwise have difficulty saving up for the deposit on their first home.

What Is FHSSS And Why It’s Here

As a part of 2017-2018’s Federal Budget, the Australian government has introduced the First Home Super Saver Scheme (FHSSS for short). It was written into law on 13 December 2017.

Under this provision, you could start contributing extra cash as of 1 July 2017 to your super fund and begin withdrawing it on 1 July 2018.

Putting your savings in your super account allows you to save up pre-tax income to put towards the deposit on your first home. Located alongside your super, the funds will be taxed at half the rate it would be if set aside in a dedicated savings account, helping you save more, faster. 

You can’t draw down dedicated super funds to pay for the deposit. You can only withdraw those you’ve contributed alongside it. What you add to your super fund for saving is extra on top of the other 9.5% you’re required to put in. The extra just gets to ride along for the tax break.

Do You Qualify?

The FHSSS arrangement is designed to help those who’ve never before owned a home. Its aim is to encourage more people to break into the property market. However, even if you’ve owned a home before, you may still qualify to take advantage of this provision if you’ve fallen on hard times financially or hope to purchase a home with someone who’s never bought before.

What You Should Know About FHSSS

There are limitations to the new FHSSS legislation. You can contribute no more than $30,000 to your super fund and no more than $15,000 of that in a single year.

Keep in mind that funds contributed from after-tax or non-taxed sources won’t benefit from super fund tax break. So you’ll have to think carefully about which money you choose to put into super account.

Remember, too, that the ATO is in charge. It’s not about how well your money does in the super fund - the ATO actually determines how much your savings can earn.

Once you withdraw those extra funds out of your super, you need to spend it within a year on a home or else relinquish it to your super fund. If you don’t comply, you could face a hefty penalty tax. This means you want to have a plan in place for spending your money before taking it out. What’s more, you should be prepared to move into your new property soon after purchase. 

Whether or not you can benefit from the FHSSS depends on your individual situation and when you’re able to access your super. It’s not right for everyone. Some experts feel it won’t make that much of a difference in the long-run when it comes to what you save. Others explain that besides the relaxed tax requirement, it’s a better way to keep money out of your reach so that you actually save it instead of squandering it.

Either way, it's important to get professional advice on the best way to save up for your first home deposit.

Seek Expert Financial Advice 

For a no obligations discussion about your needs, reach out to our team here at Calder Wealth Management. Call on 08 8373 3333 today to schedule an an appointment.

- Ben Calder, Private Client Adviser