First Home Super Saver scheme (FHSS)
What to do with your cash whilst saving for a home deposit?
Some people are happy to have their money in a bank account waiting for settlement day.
Others feel foolish just watching it sit there. It’s hardly the stuff of pub talk. Isn’t there somewhere more exciting to put it?
Yet it seems the only other option is some kind of investment that entails more short-term risk than most are willing to take.
But think about it - you NEED those funds at settlement. You can’t afford to lose any.
If you are a ‘cash’ person or want a bit more, the FHSS scheme could be an option.
What is it?
A government tax incentive for 1st home buyers.
Using your super to ‘lock up’ deposit savings until you are ready to purchase.
You even earn a notional cash-like return
How does it work?
Contribute to super (in the right amounts, at the right time, subject to caps).
Claim tax deductions for your contributions at the end of each financial year.
Apply to the ATO to release the funds BEFORE signing a contract.
Purchase your principal place of residence or land.
What kind of benefit can I expect?
The benefit of the FHSSS will vary depending on your circumstances such as
Income and marginal tax rate
Amount of contributions
Timing of contributions (over how many years?)
Notional rate of return
When you elect to access your funds
As a guideline, the tax benefit is such that an approximate 15% benefit can be gained for someone earning $45,000 - $135,000. Potentially more for higher incomes.
And if you and your partner are eligible, yes, you can both participate.
Refer to online calculators to reflect your specific situation.
Are there T&Cs?
You bet there are!
It is impossible to cover it all here, but here are some of the main points:
You must be paying tax to be of use.
It probably won’t be of use unless you are earning more than $45,000 p.a.
You cannot have owned property in Australia previously (including vacant land).
Apply to release your funds BEFORE signing a contract.
Your choices
DIY. The FHSSS is complicated and you need to invest a LOT of time understanding and doing the right things at the right time, possibly over a number of years (and still risk getting it wrong!). Tread carefully!
Make sure you get all the steps right and benefit from it. Book in a free call and speak to a professional.
Messing up your home deposit is too important to get it wrong.
The information contained in this blog has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.