What is it?
Saving for a deposit to buy your first home can be challenging. To help you to save, you can add in extra money (additional contributions) into your super account. Each year you can add up to $15,000 of eligible contributions (your compulsory employer contributions don’t count).
A $30,000 limit applies to the total contributions that can be eligible for withdrawal across all years. You can apply to the ATO to withdraw the money you contribute and use this towards your house deposit.
If you’re a couple, you can withdraw a combined total of $60,000 ($30,000 from each account). Eligibility criteria and conditions apply, read on to find out more.
Why consider it?
You may save more than you would if you were to put the money into a cash savings account with the bank.
If you make before tax contributions to your super such as salary sacrifice, tax is generally applied at 15% rather than your marginal tax rate, which could be as high as 45%. The First Home Super Saver Scheme (FHSSS) may result in tax savings for you, which can be added to your total deposit for a first home. Additionally, the scheme applies a deemed earning rate to your contribution, and this rate may be higher than other forms of investment, for example interest on a cash savings account.
Taxable income of $70,000 and salary sacrifice of $10,000
According to the ATO projections, after 3 years of saving, an estimated $25,892 will be available for a deposit. This is $6,210 more than if the saving had occurred in a standard deposit account.
How will the scheme work?
From 1 July 2018, when you're ready to start looking for your first home, you can apply to the Australian Tax Office (ATO). The ATO, not your super fund, will decide what counts towards the FHSSS.
The ATO will calculate the amount you contributed as part of the FHSSS and the amount those contributions are deemed to have earned. They will look at:
- A return of voluntary contributions you have made, plus associated earnings, minus any tax that will apply.
- If the released contributions were made on a before-tax basis, the ATO will withhold tax equivalent to your marginal tax rate less a 30% offset (or a flat 17% if your marginal tax rate cannot be estimated).
- The ATO will advise your super fund on the amount that can be released when you submit an application to withdraw your deposit savings.
- How much can I contribute?
As an individual you can contribute up to $15,000 p.a. under the scheme and no more than $30,000 in total. The overall annual contributions cap limits apply and this may limit how much you can contribute.
- What if you change your mind?
If you don’t use an FHSSS released amount for a first home deposit within 12 months (or up to 24 months if an extension was approved), you’ll have two choices:
1. Re-contribute the amount into super, or
2. Keep the amount.
If re-contributing, this must be for the full FHSSS amount you received. Note that the $100,000 annual after-tax (non-concessional) contribution cap will apply, and you won’t be able to claim a tax deduction.
If keeping the amount, the ATO will apply a flat tax of 20% on any assessable portion (i.e. salary sacrifice contributions).
- Who is eligible for the scheme?
To be eligible, you must:
- be at least 18 when you request a release of eligible contributions,
- have never owned property in Australia (including investment properties, commercial properties, a lease of land or a company title interest in land),
- not be purchasing vacant land, a houseboat, a motor home, or any property not capable of being occupied as a residence; and
- not have previously requested release of money under the FHSSS.
- What are eligible contributions?
FHSSS-eligible contributions include:
- Before-tax contributions, such as:
- Voluntary after-tax contributions
What are not eligible contributions?
Contributions that are not FHSSS-eligible include:
- Superannuation Guarantee contributions
- Employer contributions made under an award or enterprise agreement
- Government contributions (e.g. co-contributions)
- Contributions paid into your account by a spouse, parent, etc
- Contributions made in respect of a defined benefit interest
- Where to find out more
To find out more about FHSSS eligibility, visit The ATO website
We're here to help
Super can sometimes seem complex and confusing, but it's worth spending some time to check you're making the most of your retirement dollars. Help with your Sunsuper account is always on hand - all you have to do is pick up the phone.