The First Home Super Saver Scheme (FHSS): A Simple Guide
Buying a first home can be tough with rising prices and living costs. To help, the Australian government introduced the First Home Super Saver Scheme (FHSS), allowing first-time buyers to save for a deposit through their superannuation. As a finance broker, I often recommend this scheme as a smart way to save faster.
What is the FHSS Scheme?
The FHSS Scheme helps first-home buyers save for a deposit using their superannuation account. It allows people to make voluntary contributions to their super, which can later be withdrawn to buy their first home. Because super funds have tax benefits, savings can grow faster than in a regular account.
How Does the FHSS Work?
- Make Contributions: You can add up to $15,000 per year and a total of $50,000.
- Tax Benefits: Concessional contributions (pre-tax) are taxed at 15%, lower than most income tax rates, which helps you save more.
- Growth: Your money earns interest inside your super fund.
- Withdrawal: When ready to buy, apply to withdraw the money, including interest.
- Buy a Home: The money must be used within 12 months to purchase or build a home.
Examples of How FHSS Works
Example 1: Sarah’s Savings Plan
Sarah, a marketing professional, saves $10,000 per year in FHSS for three years. With the tax benefits, she saves more compared to a regular bank account. After three years, she withdraws her $30,000 plus earnings, helping her buy her first home.
Example 2: James & Lisa’s Combined Effort
A couple, James and Lisa, both contribute to FHSS for four years. James saves $12,000 per year, and Lisa saves $8,000 per year. They withdraw $80,000 plus earnings, giving them a solid deposit for their new home.
Benefits of FHSS
- Tax Savings: Pay less tax while saving for a home.
- Faster Growth: Super accounts generally have better returns than savings accounts.
- Extra Support: Can be used alongside other grants and incentives.
- Flexible Contributions: Add funds through salary sacrifice or after-tax payments.
Who Can Use FHSS?
You must:
- Be 18 years or older
- Have never owned property in Australia (some exceptions apply)
- Have not used FHSS before
- Intend to live in the property for at least 6 months in the first year
How to Withdraw Funds
Apply through the Australian Taxation Office (ATO), which calculates your maximum withdrawal amount. The funds are then released by your super fund, and you have 12 months to use them for your home purchase.
Things to Keep in Mind
- Withdrawal Time: It may take weeks to access your money.
- Contribution Limits: Plan ahead due to annual caps.
- Super Restrictions: If you don’t buy a home, your savings stay in super until retirement.
- Market Risks: Super funds fluctuate, so savings may vary over time.
FHSS vs. Other Homebuyer Schemes
FHSS works well with other programs like:
- First Home Owner Grant (FHOG) – A cash grant for first-time buyers.
- Stamp Duty Concessions – Reduced or waived stamp duty.
- First Home Guarantee – Buy with only 5% deposit and avoid Lenders Mortgage Insurance (LMI).
Is FHSS Right for You?
FHSS can be a great way to save for your first home. However, it’s important to plan your finances carefully. As a finance broker, I suggest consulting a professional to see if FHSS fits your goals.
If used wisely, the First Home Super Saver Scheme can help you buy a home sooner with less financial stress.
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