Recently, legislation has been passed that will enable first home buyers to save for the deposit in the concessionally taxed superannuation system, using the First Home Super Saver (FHSS) Scheme. This may assist participants to accumulate a larger deposit when compared to saving outside super. The Government has created an online estimator to demonstrate the potential benefits of using the FHSS. It compares making pre-tax super contributions with saving the same amount (less tax at personal rates) in a standard deposit account.

The estimator can be located at http://budget.gov.au/estimator/
         
Key dates
Contributions can be made to the scheme from 1 July 2017 and withdrawn from 1 July 2018.

What and how much can you contribute?
Only voluntary contributions you make to super will count towards your FHSS balance.

Voluntary contributions include personal, salary sacrifice and additional employer contributions, but not compulsory employer contributions (such as Superannuation Guarantee) and certain other amounts.

Voluntary contributions are limited to $15,000 per year and a total of $30,000. These contributions also count towards the existing contribution caps.

How much and when can you withdraw?
Withdrawals are capped at $30,000 plus associated earnings. The Australian Taxation Office (ATO) will determine the associated earnings based on a formula, not the actual earning rate. They will also decide the amount that can be released after allowing for applicable taxes. Before you have found a place to buy you can withdraw from the scheme, but you’ll need to buy within 12 months of withdrawing. Otherwise, the ATO may grant a 12 month extension.

Who can participate?
To take part in the scheme, you usually need to be aged 18 or over, have not used the scheme before and have never owned real property in Australia. If you plan to purchase a home with a partner who doesn’t meet the criteria – don’t worry,  you may still be eligible.

What can you buy?
Any amount withdrawn using the FHSS must be used to buy a ‘residential premises’. If you’re planning to build, this includes vacant land. The premises has to become your home (not an investment property) and you need to occupy it for at least 6 months after you buy or build it.

What happens if you don’t buy?
If you don’t buy within the required timeframe, you can contribute the released amount back into super or keep the money and pay tax equal to 20% of the assessable amount.

Could you benefit from the FHSS?
We can assist in determining whether saving for a home deposit using the FHSS is a suitable option for you and evaluate other alternatives available to you.


General Advice Disclosure: This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.