How Your Super Could be the Key to Homeownership
It’s no secret that buying property in Australia is an aspiration, albeit an expensive one. For many, it can be hard to save the amount of money needed for a decent deposit, but that’s where your super may be able to help.
The First Home Super Saver Scheme (FHSS)
This scheme was introduced in mid-2017 to allow prospective first-time buyers to voluntarily contribute money to their super fund, to save for their first home.
What are the benefits of the FHSS Scheme?
By putting extra money into your super to save towards buying your first home, when the time is right, you can withdraw the money and put it down as a deposit. This can help you save loads in tax deductions, and is an excellent way of putting money aside to buy your first home sooner.
It may even accrue earnings through investments your superfund makes. Another benefit is that you can only withdraw this money once, so there’ll be no risk of running down your savings!
Additional personal contributions made from July 2017 automatically apply under the FHSS Scheme, so you could already have savings that come under the FHSS scheme.
Am I eligible?
To be eligible for the FHSS scheme, you must be 18 years and over and have never owned property in Australia before (your own, an investment, land, or company title interest).
There are also limits on what you can use this money for. It must only be for purchasing or building a first home, which must be occupied by yourself for 6 out of the first 12 months. The property you put the money towards must not be a houseboat or motorhome.
However, there are no limits on how many people can access FHSS contributions to put towards the same home. This is particularly beneficial to couples, siblings or friends buying a house with multiple people. Even if some of the group have already owned their own home, it doesn’t stop someone who is eligible to contribute through this scheme.
How do you put money into your super fund for the FHSS scheme?
By voluntarily making concessional (before-tax) or non-concessional (after-tax) contributions into your superannuation fund, you can create a pot of money to be taken out when you are ready to buy your first home. All voluntary contributions you make after July 2017 count towards the FHSS scheme.
You can contribute concessional income for which a tax deduction has been claimed. Another option that many employers offer is a salary sacrifice arrangement where you can contribute to a super fund out of your pay before it’s taxed. Through this method, your contributions are only taxed 15% instead of the higher tax you would pay on your salary. You should check with your employer before you decide to go down this route.
You can also make non-concessional contributions which are contributed after tax, or where your tax deduction has not been claimed.
How can I withdraw money from my super when I’m ready to buy my first home?
You can only withdraw money under the FHSS scheme once, so you need to ensure this is done at the right time. You also need to ensure you purchase or build your property within 12 months of withdrawing your money. You must also occupy it for at least 6 months in the first year of purchase.
To withdraw funds under the FHSS scheme, you must apply to the Australian Tax Office (ATO). There are limits to what you can withdraw, which include not exceeding $15,000 in any one financial year, and a cap of $30,000 altogether. The ATO will tell you exactly what you can redeem, what tax will be withheld, and any associated earnings.
Whether you go down the avenue of saving for your home within your super or not, you can always benefit from using our budget planning calculator. Whether you’re saving for a mortgage or want to reduce your debt, budgeting will help you succeed!
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of buying your first home, you can contact us for information about the best options for you when it comes to your mortgage.