Superannuation is designed to help people save for their retirement. So, in most cases you cannot withdraw money from your super until you have retired after the age of 60.
To help first home buyers save a deposit, the Federal Government has introduced the First Home Super Saver (FHSS) scheme. This scheme allows you to contribute up to $30,000 into your super and later withdraw those contributions to effectively boost the deposit on your first home.
The FHSS scheme helps you to save a deposit much more quickly and accumulate a bigger deposit on your first home. Here is how it works.
First Home Super Saver (FHSS) scheme.
If you are eligible for the scheme, you can currently contribute up to $50,000 to your super fund and withdraw this amount (plus earnings, less tax) to buy your first home. Contributions can be made either as voluntary (after-tax) contributions, or through a salary sacrifice (pre-tax) contribution arrangement with your employer.
If a couple are buying a home and they are both eligible for the scheme, they could make contributions of up to $50,000 each.
These contributions can then be withdrawn and together with an amount of investment earnings deemed by the ATO and the general tax concessions all helps to boost your first home deposit.
Do you qualify under the FHSS scheme?
There are some restrictions to help ensure the scheme is only used by people genuinely saving for their first home. Here are the three main rules.
What type of contributions can you make?
After three years, Madeleine can withdraw $25,500 out of her super as a deposit for her first home. The withdrawal is assessed by the ATO and withholding tax calculated at her marginal tax rate, less a 30% tax offset applied to the withdrawal and the associated investment returns. Both the assessable amount and the withholding tax is then declared in her tax return within the financial year in which the release has been granted.
Under the FHSS scheme rules, the ATO calculates the investment return using the 90-day bank bill rate plus 3%. The 90-day bank bill rate moves around in line with trends in investment markets.
It is clear, that after tax concessions within super and the investment return Madeleine is entitled to under the FHSS, she has boosted her first home deposit and saved much faster than had she used a standard savings bank account.
How do you withdraw funds from super to use as a deposit on your first home?
Once you have saved a deposit and you are ready to buy your first home, you can apply to withdraw your funds. The best way to do this is through your MyGov account.
Some important tips you need to know.
Need more information?
The ATO is also in charge of ensuring any money withdrawn from your super account under the FHSS scheme is used to buy your first home. You will find more detailed information on the FHSS scheme at the Australian Tax office (ATO) website, see link below.
This information provides an overview of the FHSS scheme. If you would like a PictureWealth adviser to assist you in any way, do not hesitate to contact us.
Any general advice contained above does not take account of your personal objectives, financial situation and needs. You should consider the appropriateness of the advice in light of your own objectives, financial situation and needs before acting on the advice. You should also read the relevant Product Disclosure Statement and TMD before acquiring any product.
