Housing affordability is an ongoing concern for many families, and a hotly debated topic both socially and politically. First-home buyers in Sydney are faced with the very real challenge of saving a home deposit in a low-interest rate and low real-wage growth environment. To assist the group, the federal government of Australia introduced the First Home Super Saver Scheme (FHSS).
The First Home Super Saver Scheme (FHSSS) helps Australians boost their savings for a first home by allowing them to build a deposit inside superannuation, giving them a tax cut. The FHSSS applies to voluntary superannuation contributions made from 1 July 2017. These contributions, along with deemed earnings, can be withdrawn for a home deposit from 1 July 2018. In simple terms, the scheme allows super members to save for a first home deposit via their superannuation account, as well as (or instead of) their bank account, which typically yields lower returns. It is a government scheme made to assist first home buyers in Sydney with speeding up the time it takes to save and buy your first home.
Advantages of this scheme
The First Home Super Saver Scheme makes it easier for you to save your deposit by making before-tax contributions to your superannuation. It can automate saving for your deposit by portioning a part of your income to be put into your super account before tax. Here are some of the benefits that a first home buyer in Sydney can make use of:
- Any earnings that you make on contributions to the First Home Super Saver Scheme are taxed to 15% in your superannuation fund, this can assist with speeding up your savings because the tax rate is likely less than your marginal tax rate.
- You get favorable tax treatment on eligible funds that are withdrawn (and any earnings associated) from your super.
- Putting your savings on autopilot, and having them in the FHSSS makes them genuine savings in the eyes of the banks.
- If you do not use the funds to buy a home you can keep them in your super fund and help build for the future.
Who is eligible?
If you are a first home buyer in Sydney and clears the following criteria, then you are eligible:
- You need to be 18 years or older to participate in the Scheme.
- You did not own property in Australia before.
- You have not previously had an amount released from super under the Scheme.
- You need to either live or intend to live in the property you are buying as soon as practicable and, for at least 6 months of the first 12 months, you own it.
How to withdraw from super under this scheme?
When you’re ready to purchase a home, you will need to request the ATO to advise you on how much you have available to withdraw. You can then submit an application to them asking for the funds to be released from your super. Note that your maximum release amount will be the total of your eligible contributions, taking into account the yearly and total limits, and associated earnings (your concessional contributions and associated earnings that are withdrawn will be taxed at your marginal rate with a 30% offset.) Once you withdraw your funds, you will be given 12 months to purchase your home, which can be extended up to 24 months, in exceptional cases only. If you’re unable to purchase or change your mind, you will need to return the funds to your super account or pay a tax equal to 20% of the concessional amount released.
How much can you save?
There are limitations on the amount you can save using the First Home Buyer Super Saver Scheme. There is a maximum voluntary contribution of $15,000 per financial year or up to a maximum of $30,000 in total. Voluntary contributions can either be concessional contributions from pre-tax income like salary sacrifice, or personal contributions in which a decision has been claimed. Non-concessional contributions can be made from after-tax income and no-tax deduction can be claimed.
If you are a first home buyer in Sydney, you should very likely try this scheme. It is an initiative by the government to encourage a first home buyer in Sydney, like you, to take a step forward and buy their first home.
You do not need to worry if this scheme is confusing you. We can help you with this. Connect with us today at https://freshwaterfs.com.au , and we will guide you through the entire process.
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