How to save and retrieve your money
If you are eligible for salary sacrifice through your employer then the federal government has an alternative way to help you save for your first home. It's called the First Home Super Saver (FHSS) scheme and it makes it possible for you to allocate part of your income to your superannuation to be withdrawn (along with any associated interest) when you buy your first home.
We've already covered what salary sacrifice is as well as eligibility in our previous blogs.
In this blog, I actually wanted to cover how to go about making payments and releasing your contributed money.
Putting your savings in
There are two ways you can contribute to your FHSS.
1. Voluntary concessional contributions
These are amounts that have tax deduction claims on them. You can use salary sacrifice to transfer the money in before tax directly from your employer or you can claim a tax deduction for any payments you have made after-tax on your annual tax return form.
When you withdraw your funds to buy your first home any voluntary concessional contributions you allocate will incur a tax, which is usually 15%.
This tax will not be debited until you request for the fund's withdrawal. If you leave the voluntary payments (or part of the payments) in your superannuation fund for your retirement you will not be charged any tax.
2. Voluntary non-concessional contributions
These are funds you have transferred from your accounts after tax has been taken. You make these payments through direct debit set ups or…
This can also include funds transferred from overseas bank accounts.
Any money you input into your FHSS after tax will be returned to you in full along with any associated earnings (interest earned).
Getting your savings out
Requesting your funds is a two-step process.
1. Requesting a determination
To withdraw your voluntary super contributions to buy your first home you will need to request a FHSS determination from the ATO. You can do this by applying online using your myGov account linked to the ATO.
This MUST be completed before you sign a contract to buy a home.
When you apply for a FHSS determination you will be informed of the maximum release amount available to you. The FHSS maximum release amount takes into account:
-The limits for withdrawals ($15000 yearly and $30,000 total)
-Tax on concessional contributions
-Any associated earnings
From there you can decide if you want to continue with a withdrawal or if you want to wait until you have accumulated more funds.
Check over the amounts carefully and make sure they are correct. If you wish to lodge a disagreement you can only do so at this stage, before you apply for release of funds.
You can request a determination on more than one occasion but only if you have not continued to signing a purchase contract.
2. Requesting release of fund
Once you have a determination and you are happy to continue you will apply for a release of your amounts.
You can use the maximum release amount shown on your determination, or you can opt for a lower amount. Any contributions that are not released at this time will stay in your superannuation fund until your retirement.
If you have already found the home you wish to purchase then as soon as you have the determination you can sign a contract to purchase your first home. If you choose to take this path you must request a release of your funds within 14 of signing the purchase agreement on your new property. If you fail to apply for release of funds within 14 days of signing your contract will be subject to FHSS tax which is an additional 20%.
After you have requested the release the ATO will then issue a release authority to your superannuation holder. It can take as long as 15 and 25 business days for you to receive your money.
Applying for your home
You must apply for and receive a FHSS determination from the ATO before you sign a contract for your first home or apply for a release of your FHSS amounts.
The best way to proceed is to sign your contract to purchase or construct your first home from the date you make a valid release request. You can choose to sign after receiving the determination, however, you do need to do this promptly to meet the 14-day cut-off.
If you haven't found your home when you make your application to release the FHSS funds that's actually okay. You still have 12 months from the release of funds date to find a home and sign a contract. When you do sign it's important that you notify the ATO within 28 days to let them know it has been completed.
Failing to meet requirements
If you fail to notify the ATO that you have signed a contract or if you choose to keep the FHSS money without buying a home you will be subject to the FHSS tax.
This is a flat tax equal to 20% of your assessable FHSS released amounts and not the total amount released.
We wrap up this series with a final blog about different provisions and professional advice.