First Home Super Saver Scheme
From 1 July 2018, individuals have been able to apply to the ATO to withdraw voluntary superannuation contributions made since 1 July 2017, provided certain eligibility criteria have been met under the First Home Super Saver Scheme (FHSSS).
While there are many intricacies to the FHSSS legislation (and this article does not intend to cover each and every one), the scheme presents a potential opportunity for those saving for their first home to do so in a tax effective manner when compared to saving outside of the superannuation environment.
The maximum amount of contributions that can be made under the FHSSS for any individual are capped at $15,000 per annum, and an overall total of $30,000. As this assessment is made on an individual basis, it is possible for more than one person intending to purchase their first home together to each be able to take advantage of these caps.
We have recently recommended FHSSS strategies to clients to fast track their savings for their first home deposit by reducing their tax liabilities. One was an individual who was able to benefit by an amount of $1,863 over six months as a result of the strategy, while more recently a young couple were able to benefit by an additional $9,405 combined over a 12 month period.
It is important to note that only voluntary superannuation contributions will count towards the FHSSS. This means normal employer superannuation guarantee contributions (calculated at a minimum of 9.5% of your ordinary employment income) are not eligible to be withdrawn under the scheme.
The types of voluntary contributions which can be withdrawn under FHSSS provisions are personal concessional (tax deductible) contributions, personal non-concessional (after tax) contributions and salary sacrifice contributions made through an employer.
The level of funds you can release from superannuation under FHSSS provisions depends on the amount and type of contributions you made that were eligible for the scheme, and a deemed rate of earnings on those amounts contributed. Note that actual earnings are not used in this calculation; instead, earnings for the purposes of the FHSSS are calculated daily using the Shortfall Interest Charge (which currently sits at 4.96% per annum), rather than the actual earnings produced by your superannuation investments.
The process to have funds released from your superannuation fund under FHSSS provisions is quite involved, and it is key to plan ahead and get the ball rolling on this process well before you require the funds for your house purchase or construction.
Funds must be released from superannuation under the FHSSS before entering into a contract to purchase (or construct) your first home. There are also requirements to meet if funds are released and not spent on an eligible property within the required timeframe (effectively there are two options here: recontribute the released amount to superannuation permanently, or pay tax of 20% of the released amount under FHSSS provisions).
There are many technical aspects to the FHSSS legislation, so it is extremely important you seek advice which is tailored to your personal circumstances to determine if it is right for you. We’re here to help guide you through financial decisions like these, so why not drop us a line to arrange a catch up for a chat?
The above information represents general advice only and has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any general advice you should consider whether or not it is appropriate in regard to your personal objectives, financial situation and needs.