Save faster for your first home with the increased FHSS
About the author
Jane Slack-Smith has been named one of the Top 10 Property Experts in Australia by Money Magazine, one of the Top 4 Financial Influencers by Qantas and been awarded the Australia’s Mortgage Broker of the Year twice.
There’s good news for first home buyers. The First Home Super Saver (FHSS) scheme which allows you to save for your deposit in your super account, is increasing its maximum release to $50,000.
How it works is a little complicated, but we’re here to guide you through the steps. Here’s what you need to know.
The FHSS scheme helps first-home buyers save for a deposit through their super. It allows you to reduce your taxable income as you save money for your future home. From 1 July 2022, the maximum amount you can access will increase from $30,000 to $50,000.
How does FHSS work?
Under the FHSS scheme, first-home buyers can use voluntary super contributions of up to $15,000 each financial year to help them save for their first home. You make voluntary super contributions from your salary or savings. The benefit is that the money you save in your super is taxed at a lower rate – only 15%. This means you pay less tax on the money you put towards your deposit, and it may earn more than if it was in an ordinary bank account.
On top of your contributions, a percentage of the earnings your contributions make is included when calculating how much you can withdraw through the FHSS. This figure is calculated by the Australian Taxation Office (ATO) not your super fund. We can give you an idea of the current earning percentage being used. Here are some examples of how the scheme works.
- You have salary sacrificed $15,000 every year for three years ($45,000) and the ATO calculates you earned $5,000 from that investment. You can then apply to release the full $50,000 amount.
- A couple who have saved in their individual super accounts would have a combined FHSS release of $100,000.
- If you salary sacrifice $10,000 a year, you may need to wait four or five years to reach $50,000 or access a lower amount sooner.
Are you eligible for the FHSS scheme?
You must be 18 or older to register for and release money under the FHSS scheme. You must also never have owned any type of property in Australia.
Eligibility is assessed on an individual basis. This means that individuals can access their own FHSS contributions to put towards the same property. It also means that if another person who already owns a property is buying with you, you can still apply for your FHSS release.
Getting your funds in time for settlement
It’s important you understand the process for having your funds released in time for settlement. The ATO can take some time, so it’s a good idea to start the FHSS process when you first apply for pre-approval on a home loan. You’ll need a minimum of six weeks for each step.
The first step is to apply for a FHSS ‘determination’ from the ATO – not your super fund. You can do this using your MyGov account. The ATO will calculate how much you can release and give you their ‘determination’. It’s very important that you receive your determination before signing a contract for a property.
Once you get the determination, you can request the funds be released. Again, do this through your MyGov account and as soon as possible. The ATO website has a summary of all the conditions for releasing money under FHSS.i
Remember that you can only use the FHSS scheme once. However, you have up to 12 months to sign a property contract from the date you make a valid release request to notify the ATO.
The First Home Super Saving scheme may help you save for your first home deposit faster than a regular bank account – and help you pay a little less tax too.
We can help you manage the timelines and rules involved so your funds are released in time for your settlement. Simply give us a call to find out how the FHSS scheme could help you own your first home sooner.