How to use your Super to buy your first home.

First Home Super Saver Scheme (FHSS)

The FHSS is a scheme introduced in the 2017-18 federal budget which allows FHBs to make voluntary contributions to their superannuation to save for a home. Applications to release contributions will start July 1 2018.

Essentially, the FHSS allows eligible individuals to build a home deposit inside super at discounted tax rates. These rates, together with potentially stronger investment returns, work together to help individuals save a home deposit sooner.

Because the money is inside your super you are accessing a higher interest rate, and there are tax discounts, which make it a more valuable option than a regular savings account.

How much is it?

You can make voluntary contributions to your super to save up for your first home. You can contribute a total of $30,000 towards FHSS savings but only $15,000 in anyone financial year.

How do I access it?

You need to request a determination from the Commissioner of Taxation. This will tell you the maximum you can access, your associated earnings and any tax which will be withheld.

Pros

The maximum you can withdraw is $30,000, but if you’re purchasing a home with someone else using the scheme they will also have access to $30,000. You also get any interest earned on your contributions.

Pre-tax contributions made to super are taxed at a lower rate compared to your income paid to your bank account. This means more of your earned money stays with you and therefore you save money faster.

Cons

This was a controversial scheme when it came into place, largely due to concerns about allowing FHBs to access their super. Because these concerns were widely publicised, financial advisers are finding that FHBs are now scared of the scheme and less likely to take advantage or investigate for themselves.

The earnings on your money in the super are calculated using a very complex system. Alongside this, you are taxed for earning the money, and then again when you withdraw it. Because of these aspects, and the fact you can only use the FHSS for a maximum of $30,000, the scheme hasn’t been considered as effective as it could have been.

Speak to your financial advisor to see if you are eligible to use the scheme.