Superannuation Access for First Home Buyers

Superannuation, commonly referred to as ‘super’, is money that is paid by your employers over the course of your working life for your use once you retire. Superannuation is important, because in the simplest form the more that you save throughout your working life, the more money you will have for your retirement.

Superannuation can be a large sum of money and arguably it could be extremely helpful early in people’s lives to help get them into the ever-growing Australian property market. This could allow people to be better set up for retirement in the long run.

What is the First Home Super Saver Scheme (FHSSS)?

The FHSSS is a scheme created by the government which allows First Home Buyers (FHBs) to save for a house deposit. It assists FHB to do this by allowing FHBs to take advantage of the tax concession benefits of doing so within their superannuation account.

You are able to apply to release your voluntary contributions along with the money earned on those contributions to help you in purchasing your first home. There are a range of eligibility requirements that you must meet set out below in this article.

At this current time, you can access a maximum of $15,000 per financial year and a total of $30,000 in contributions under the FHSSS.

What do the changes mean?

In the 2022 Federal budget, it was announced that from 1 July 2022 The FHSSS will allow first home buyers to essentially create a deposit inside their superannuation. From this date, the maximum amount of voluntary contributions that can be released will increase from the current $30,000 to $50,000. However, the amount that is able to be released each financial year will stay at the current $15,000.

Eligibility Criteria

There are a range of different eligibility requirements and the process that is needs to be followed in order to take advantage of the scheme which are set out on the ATO website.

You are able to gain access to the scheme if you have never had an interest in real property before and you will occupy the property you are buying as soon as practical and will do so for at least 6 months.

Contributions and determinations

You are not able to access contributions from your employer or spouse. You are also required to get an FHSS to determine your eligibility, this must be done prior to entering into a contract. You will need to keep track of your eligible contributions for the application process. It is important to ensure the accuracy of all information given in your application. The $50,000 limit will only be applicable to applications from 1 July 2022.

You are only able to request a release under the scheme once. Only homes purchased or constructed in Australia are eligible. Any debt owed to the ATO or government agency will be deducted from the released amount. You must notify the ATO within 12 months from the release request if a contract to purchase or construct has been entered or recontributed the amount.

You should check that your superannuation fund will allow the early release and check with your employer to ensure that they have a voluntary contribution scheme.

Who is eligible to request an FHSS determination?

You must be 18 years or older to access the scheme. However, can make contributions before.  You must never have had an interest in property in Australia. Unless the Commissioner of Taxation determines that you have suffered financial hardship. Eligibility is on an individual basis. Couples can access their own eligible FHSS contributions for the same property. One party’s eligibility does not affect the others.

Financial Hardship

There is an exception to eligibility requirements where you suffered a financial hardship that resulted in a loss of ownership of all property interests. Including bankruptcy, separation, illness etc. You must provide evidence of a correlation between the loss of your property and your hardship event.

Eligible contributions

Eligible contributions include voluntary concessional contributions – including salary sacrifice or contributions for which a tax deduction has been claimed or you intend to claim. Or voluntary non-concessional contributions that you have made.

Applying to Release Super Savings

You must apply to the ATO for an FHSS determination and a release. You must do so before signing a contract as once you do so you are in most cases no longer eligible.

You apply online using your myGov account. You must ensure all information is accurate in accordance with your super statements there is some flexibility to request rectification of mistakes.

Conclusion

The FHSS Scheme is a Federal Government initiative that has been around a while that not many people have heard about. There are many benefits to the scheme that are aimed at helping people enter the property market. You should contact an accountant for tax implication advice as the information provided is general only.