If you’re a first home buyer, you may be eligible to withdraw voluntary super contributions you’ve made (plus earnings) to put towards a home deposit.
Through the First Home Super Saver Scheme (FHSSS), first-home buyers may be able to use Australia’s superannuation system as a tax-effective way to save for part of their home deposit.
If you’re aged 18 or over and are an eligible first home buyer (which broadly means that you’ve never owned any Australian property before), you can withdraw voluntary super contributions which you’ve made since 1 July 2017 to put towards a home deposit. There’s more on eligibility criteria below.
Under the FHSSS, first home buyers, who have made voluntary super contributions of up to $15,000 per financial year into their super, can withdraw these amounts (plus associated earnings/less tax) from their super fund to help with a deposit on their first home.
If you’re eligible, the maximum amount of contributions that can be withdrawn under the scheme is broadly $50,000 for individuals.
Voluntary super contributions don’t include the compulsory super guarantee contributions your employer is required to make into your super fund, if you’re eligible. Spouse contributions (which are those that your partner may choose to put into your super fund) also can’t be withdrawn under the scheme.
Voluntary contributions that can be withdrawn include:
These are contributions you can get your employer to pay you out of your before-tax income if you choose to, which are on top of what your employer might pay you under the super guarantee, if you’re eligible.
These are contributions you can make (such as when you transfer funds from your bank account into your super) that you then claim a tax deduction for.
These are contributions which you can also make by transferring funds from your bank account into super, but which you don’t claim a tax deduction for.
Due to the favourable tax treatment, generally available through super, the FHSSS intends to help first home buyers to grow their deposit more quickly.
When money is withdrawn under the FHSSS, amounts that were contributed as before-tax or tax-deductible contributions are taxed at your marginal tax rate, less a 30% tax offset, while amounts that are contributed as after-tax contributions aren’t subject to additional tax.
Note, tax will also apply to the associated earnings.
Meanwhile, it’s important to understand that the money you save through the scheme mightn’t be enough for a full deposit to buy your first home, but you could combine it with other methods of saving to potentially help you get there faster.
To make a withdrawal under the scheme, an application to the Australian Taxation Office (ATO) will be required, and an eligible person is only allowed one FHSSS withdrawal in their lifetime.
If you’re potentially looking to purchase something soon and would like to speak to our in-house Mortgage Broker Todd Davies don’t hesitate to call the office to make an appointment on tel |PHONE| or alternatively, book online with Todd by using this booking link.
Source: AMP July 2022
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