Written by- Avjeet Gill (Avi) 5 min read. www.redtiemortgages.com.au www.avjeetgill.com 0403 706 910
The First home super saver (FHSS) scheme was introduced by the Australian Government in the Federal Budget 2017–18 to help First home buyers save money for deposit. It was formally approved on 13 Dec 2017.
For some reason, there has not been much initiative to provide enough information on this or somehow the concept was not able to grab the attention of the masses.
Under this scheme, first home buyers can start contributing $15000 voluntarily into their super from July 2017 and start withdrawing from July 2018.
Rules for use of FHSSS are simple:
- You either live in the premises you are buying or intend to, as soon as practicable.
- You intend to live in the property for at least six months of the first 12 months you own it, after it is practical to move in.
Who is Eligible?
You can start making super contributions from any age. Under the First home super saver (FHSS) you can’t request a release of amounts scheme until you are 18 years old, and you:
- have never owned property in Australia – this includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia.
- have not previously requested the Commissioner to issue a FHSS release authority in relation to the scheme.
What is really good about this scheme?
Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSSS contributions to purchase the same property.
Unlike FHOG (First Home Owner Grant), if you or your partner have previously owned a home, it will not make you ineligible. Let’s say, your partner had previously owned home in Australia, you might not be eligible to use First Home Owner Grants set out by different states, but you can use your FHSSS towards the property. So now to buy property, you can partner with your friend, relative or any other family member
Financial Hardship provision
What is another good thing about is that you might be eligible for the FHSSS even if you are previous house owner. All you need to do is prove Australian Taxation Office (ATO) or the tax man that due to financial hardship you have lost ownership of all property interests. Type of events that determine the financial hardship are:
- divorce, separation from a de-facto partner, or a relationship breakdown
- loss of employment
- being affected by a natural disaster
- being eligible for early access to superannuation
Please contact Australian Taxation Office before you start saving. Evidence needs to be provided to link loss of property and hardship event.
Where to start?
You can start saving by entering asking your employer if you can make voluntary personal super contributions as some funds are not eligible specially constitutionally protect funds* like West state super or Gold state super.
Some employers also do not offer salary sacrifice arrangement to the employees so please check before contributing.
Before you decide to start your saving please keep in mind the following 3 points: –
- Check, the nominated super fund will release the money.
- Fees, charges or insurance attached to the contributions or fund
- Be aware that contributions under FHSSS will affect your tax for the year in which you request the release.
Existing types of Contributions
There are two types;
- Voluntary concessional contributions– If contribution is done before tax deductions then they will be taxed at 15% upon release.
- Voluntary non-concessional contributions– contributions made after tax. No tax upon release.
So to make it easy and clear-
You can withdraw
- 100% of your non-concessional (after tax) amounts
- 85% of your concessional (pretax) amounts.
Ordering rules Apply
ATO will apply ordering rules when releasing FHSSS amounts.
General rules are:-
- First-in first-out rule-simply means contributions made in earlier year will be counted first than the contributions made in later year
- A simultaneous rule- if you made an eligible concessional contribution and a non-concessional contribution at the same time, the non-concessional contribution will be counted first
- If you claim deductions on some or all eligible contributions within a financial year, the resulting if any non-concessional contributions will be taken before any eligible concessional contribution.
Requesting the release
You can qualify for the release from 1st July 2018. When ready just apply to the commissioner of taxation for determination and release.
Maximum release is $30000 per person, $15000 a year.
Once approved FHSSS will be in your account within 25 business days.
After saving have been released, you have up to 12 months’ time to sign a contract of purchase or construct a home.
Saving cannot be used on;
- Nonresident properties
- A motor homes
- Vacant land
Please contact ATO for further information or go to https://www.ato.gov.au/Individuals/Super/Super-housing-measures/First-Home-Super-Saver-Scheme/.
Avjeet Gill (Avi) is an accredited financial broker and a blogger. This article is a general representation of his thoughts and views. This work is a copyright of Avjeet Gill (Avi) and should not be used for personal or professional gains.
Please check with your bank or broker before you take any financial assistance. Avjeet Gill (Avi) or anyone associated with him will not be liable for any kind of loss.
If you have any questions, please do not hesitate to contact Avjeet Gill (Avi) at 0403706910 or email to firstname.lastname@example.org