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How you can save a deposit in super to help buy your first property

26 Jul 2023 4 min read

With rising interest rates, increased costs of living and high property prices1, how can first home buyers enter the Australian housing market?

While the market may not be an easy one, there are options available to help — one of them being the First Home Super Saver Scheme.

What is the First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSS Scheme) allows first home buyers to save money for a deposit inside their superannuation.

How does the FHSS work?

You must make your own voluntary contributions into your superannuation fund. Note that voluntary contributions made before 1 July 2017 are not eligible to be withdrawn under the FHSS Scheme. Voluntary contributions can be before tax (salary sacrifice) or after tax.

Under the FHSS Scheme, you can apply to withdraw:

  • up to a maximum of $15,000 of your voluntary contributions in any one financial year
  • up to a maximum of $50,000 across all years

You will also receive an amount of deemed earnings that relate to those contributions.

You can only apply once for release under the FHSS Scheme. The ATO will withhold the applicable amount of tax from the payment and will offset against any outstanding Commonwealth debts.

Who can use the FHSS scheme?

The scheme is open to those who:

  • Have never owned a property in Australia
  • are 18 years and older upon withdrawal of funds
  • live or intend to live in the purchased premises as soon as possible (and for a minimum 6 months of the first 12 months of ownership)
  • have not previously received a First Home Super Saver payment.

How can you make contributions to your superannuation fund for the FHSS?

Voluntary contributions can be made on a before-tax basis (via salary sacrifice or by claiming a tax deduction on voluntary contributions you’ve made out of your after-tax income)
OR
Voluntary contributions can be made on an after-tax basis (by not claiming a tax deduction for voluntary contributions made out of your after-tax income).

It’s important to consider the tax treatment for each type of contribution and be aware that annual contribution caps apply to both before tax and after-tax contributions made to your superannuation fund. Any contribution made for the FHSS will count towards these caps and if you exceed your caps, additional tax may apply.

How can you withdraw your savings for your deposit?

Before you make a withdrawal from your superannuation for your property deposit, you will need to make an application to the ATO using your MyGov account and your linked ATO account. You will then be issued with a FHSS determination which will outline how much you will be able to withdraw from your superannuation under the scheme. You must apply for a determination before signing any property contract.

Once you have a FHSS determination you can then decide to apply for a release of your amounts if you are ready to purchase your property. The ATO will issue a release authority to your superannuation fund requesting they send your FHSS release amount to the ATO. The ATO will withhold the relevant amount of tax and offset against any outstanding Commonwealth debt and pay you the remaining balance.

What are some of the pros of the FHSS?

  • You will be paying lower tax while saving for your deposit in your superannuation fund compared to if you were saving outside of superannuation. By paying lower tax, you will be saving more money to go towards your deposit, meaning you may be able to save your deposit faster than without the scheme.
  • If you are purchasing a property with someone who is not a first time homeowner, you can still use the scheme.

What are some of the cons of the FHSS?

  • You can only withdraw up to $15,000 per financial year, a maximum of $50,000 in total when using the scheme. This will most likely only cover part of your deposit.
  • You can only request to release your savings under the scheme once. It can also take 15-20 business days for your money to be released, so you will need to plan ahead with the purchase of your property to make sure you can withdraw the deposit in time.

Is the First Home Super Saver Scheme right for you?

The FHSS Scheme may not be suited to your circumstances and needs. Before making any financial decisions it’s important to carefully consider all the pros and cons and your own situation. For more information, contact your superannuation fund, financial planner or refer to NGS Super’s FHSS Scheme Information Sheet.

Other considerations:

When you apply for a home loan, your lender may ask to see a history of regular savings (usually for a period of 3-6 months). You should speak with your lender to confirm if they accept FHSS savings as ‘genuine savings’ before opting into the scheme.

Start your journey with NGS Super

If you feel ready to review your finances, why not connect with one of our NGS Super Specialists?

Our Super Specialists are here to help. Our Super Specialists can help you to better understand your NGS superannuation, investments and insurance. They can also help you decide the next steps — including if meeting with an NGS financial planner is right for you.

Seeking advice is a way to plan for your future, help to mitigate the risk and make the most of your saving opportunities. Education is integral to the planning process — it’s important that you feel confident and informed at all times.

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