Introduced by Australian Government in the 2017–18 Federal Budget , the first home super saver (FHSS) allows you to save money for your first home inside your superannuation fund. This will help first home buyers save faster and reduce the added pressure of housing affordability.
What Is It?
From 1 July 2017, you can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super in order to save for your first home.
From 1 July 2018, you can then apply to release your voluntary contributions, along with associated earnings, to help you purchase your first home. However, you need to meet the eligibility requirements.
You can use this scheme if the following applies:
o You either live in the premises you are buying, or intend to as soon as possible.
o You intend to live in the property for at least six months within the first 12 months you own it.
You can apply to have a maximum of $15,000 of your voluntary contributions from any one financial year included in your eligible contributions to be released under the FHSS scheme, up to a total of $30,000 contributions across all years. You will also receive an amount of earnings that relate to those contributions.
o You can only apply for release once.
o Don’t sign your contract to purchase or construct your home until the ATO has released the first FHSS amount to you or you may be liable to pay FHSS tax.
o After you have requested the release, it may take up to 25 business days for you to receive your money.
You then have 12 months from the date the first FHSS amount is released, to do one of the following:
o Sign a contract to purchase or construct your home – you must notify the ATO within 28 days of signing the contract
o Recontribute the assessable FHSS amount (less tax withheld) into your super fund and notify the ATO within 12 months of the first FHSS amount being released to you.
o If you don’t notify the ATO or you choose to keep the FHSS money, 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.
Who Is Eligible?
You can start making super contributions from any age, but you can’t request a release of amounts under the FHSS scheme until you are 18 years old.
Also, you must have:
o Never owned property in Australia – this includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia (unless the Commissioner of Taxation determines that you have suffered a financial hardship.
o Not previously requested the Commissioner to issue a FHSS release authority in relation to the scheme.
Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSS contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.
Financial Hardship Provision
You may still be eligible even if you have previously owned property in Australia, if the ATO determines that you have suffered a financial hardship that resulted in a loss of ownership of all property interests. The types of events that could result in the loss of property interests include:
o Divorce, separation from a de-facto partner, or a relationship breakdown
o Loss of employment
o Being affected by a natural disaster
o Being eligible for early access to superannuation.
If you want to be considered under the financial hardship provision you can apply via the ATO online.
You must provide evidence with your application that demonstrates the link between the loss of your property and your hardship event.
If the ATO accepts that you have suffered a financial hardship, you must also meet the following at the time you lodge your form:
o You must not have acquired a subsequent interest in real property in Australia since you lost the property as a result of financial hardship.
o You must be over 18 years of age.
o You must not have previously requested a release of FHSS amounts.
Take us up on our free consultation here at Ross Accounting so you can get cracking at becoming a first homebuyer.
Information sourced from the Australian Taxation Office (ATO).