Who is eligible for First Home Buyers Super Saver?
When it comes to how to save for your first home you may want to consider the First Home Super Saver (FHSS) and allocate funds to your superannuation instead of a bank.
My previous blog covered salary sacrifice and give a brief introduction to the government FHSS scheme. Now we go into a little more detail on eligibility, however, there are some provisions on these which will be included in the final blog of this serious (blog #4). For how to make contributions and receive your first home buyer payment see the next blog on saving and spending #3.
You can use the government FHSS scheme if you are a first home buyer and meet the eligibility requirements that follow:
-You are 18 years old or older when you apply for your FHSS fund release and determination. (Although you can make voluntary contributions at any age).
-The home you buy is located in Australia.
-The home you purchase is for residential purposes only and is not a houseboat, motor home or vacant land without the ability to build a residential home.
-You move into the property as soon as possible after the purchase.
-You spend a minimum of six months occupying the premises within the first year.
-You have not already signed a contract to purchase your first home
-You have not applied for the release of your FHSS funds previously.
-You have never owned property in Australia, including vacant land, an investment or commercial property, a lease of land or a company title interest in land. (There are provisions on this one- see blog #4)
-You will not claim further tax deductions on the included non-concessional contributions.
-The contributions to your superannuation were not made to a constitutionally protected or defined benefit interest fund.
-You sign a contract to buy a home (or construct a home) within 12 months of your request to release funds
-You request to release funds within 14 days of signing the contract (only after first receiving determination).
-Overall the conditions for the release of your voluntary contributions are very similar to those for the first home buyers grant although there are a little more lenient in a few areas, meaning that even if you are not eligible for the First Home buyers Grant that cuts out or reduced stamp duty, you may be able to use FHSS to help save for your home.
-One of these differences is if you are buying your first home with your partner or family member but they have previously owned property, you would not be eligible for the first home buyers grant. The good news is that if you are a first home buyer and eligible in all other areas for FHSS scheme then you can release your voluntary funds from your super to put towards your home, even if other title owners are not first home buyers.
Limitations on release amounts
There is a limit to how much of your voluntary payments you can withdraw to put towards your first home. From any one year, you are not able to release more than $15,000 regardless of how much you have contributed.
In total, the maximum release amount regardless of the number of years you have made contributions is $30,000. (These amounts do not include any associated earnings.)
Any funds you input over this limit will remain in your super account until your retirement.
For example, if you were to make salary sacrifice amounts of $300 a week, at the end of the year you would have saved $15,600. You are only able to withdrawn $15,000 of that money (less 15% tax) = $12750. After which you would be credited the associated earnings on those funds over the year.
You will need to complete a tax return form including the FHSS payments and associated interest. Your tax accounted will be able to give you more details on the correct lodgement. I briefly cover this in the final blog Tax and Provisions.
To help you keep track of the maximum FHSS amounts you have available you can check your balance with your super fund at any time.
You can only request to withdraw your funds once
This is a one-time offer so you need to make sure you have all the money you need ready before you submit the request to withdraw FHSS funds. Also, go over your determination carefully to make sure the amounts are correct before continuing.
If you change your mind about your readiness to buy, if your circumstances change, or you do not go through with the sale, the FHSS money you withdrew can either be kept and further taxed (20%) or reallocated to your super account (minus tax). If you reallocate into your super you are not able to withdraw it again until you retire.
How much interest will I earn?
The associated earnings (interest) accumulated will depend on your super provider and fund choice, some have more aggressive investment options than others. The other determining factor is how long the funds have been in your super account. The Australia Tax Office (ATO) has devised a calculation for withdrawing your funds so that the maximum fund amount is available to you.
When you request your determination the calculations will return any voluntary non-concessional contributions you made first, these payments will be returned to you in full (100%) rather than salary sacrifice amounts that will incur 15% tax.
The calculations will also return the oldest money to you first so the first contributions you put in will be first out, giving you the maximum associated earnings in return.
For example, if you made voluntary deposits of $200 a week for three years you would have contributed $31200. Of that money only the first $30,000 is available.
The ATO will charge 15% tax on any voluntary concessional contributions deposits before returning the rest to you along with any awarded interest accumulated over the three years. The funds and attached associated earnings from the first and second year you started saving will be paid to you first, giving you the most interest return, while the cap excess ($1,200) that will remain in your superfund will only be from the last six payments.
To learn more about concessional and non-concessional payments see the following FHSS blog on How To Save And Retrieve Voluntary Payments.