If your goals as a professional in mining and resources include purchasing your first home, the new First Home Super Saver Scheme (FHSSS) is well worth your consideration. The FHSSS allows individuals to make voluntary superannuation contributions with the ability to withdraw them (plus associated earnings) for the purchase of their first home later.
The FHSSS offers tax benefits when using superannuation as the investment vehicle when saving for the deposit for your first home. Designed to help first home buyers save faster, and accumulate more, the Scheme enables you to benefit from super’s concessional tax treatment at each stage in the process: when you make contributions; as earnings accumulate on those contributions; and when you withdraw your funds.
The FHSSS was introduced in 2017-18 to reduce pressure on housing affordability. Eligibility criteria determine participation and there are limits on how much can be contributed. There are also ‘escape’ options should your purchasing arrangements change after you have withdrawn the funds.
On the plus side
A major advantage of the scheme is that it provides a high level of discipline as your savings will be locked in super until withdrawn. Another plus is that you may use an existing super account, which makes the set-up easier.
Voluntary concessional (before tax) and non-concessional (after tax) contributions can be used in the Scheme and earnings that accrue are taxed at a maximum of 15% (generally significantly lower than your marginal tax rate). Concessional contributions and associated earnings are withdrawn at a concessional tax rate while non-concessional amounts are withdrawn tax free.
Eligibility is determined on an individual basis and this means if one member of a couple is not eligible, the other may still be. ‘Couple’ is defined very broadly and includes de-facto and married couples, siblings and friends.
If, in the end, your savings are not needed for a home deposit, they can remain in your super to build towards your retirement or they can be withdrawn with a tax penalty. There are also financial hardship provisions that may allow you to access your FHSSS savings even if you have previously owned property in Australia.
Eligibility and conditions
It’s essential to consider other stipulations of the FHSSS and I recommend you seek professional advice so that your goal of saving for a home deposit may be understood in the context of your overall financial position and other financial goals.
Due consideration must be given to rules that include the following:
- FHSSS contributions are limited to a maximum of $15,000 in any one year up to a maximum of $50,000 over 5 years. The contributions made within a year must also be within the relevant contribution cap. It’s important to remember that only voluntary member contributions, either concessional or non-concessional, can be withdrawn under the FHSSS.
- While there is no age restriction on making initial contributions, an individual must be 18 or more before requesting a withdrawal and multiple withdrawals are not allowed. The allowable withdrawal amount is based on a ‘deemed earning rate’ which could be lower or higher than the actual earning rate and tax will still be payable.
- There may be delays of up to 25 days before withdrawal money is released, which could be an issue if you have already found a house to buy at the time you apply to withdraw. Penalty tax would be payable if the money withdrawn is not used as a house deposit and other conditions are not met.
Your next step…
In a nutshell, the First Home Super Saver Scheme allows you to enjoy the tax benefits associated with using super to save for your first home purchase. To find out more about the FHSSS for your particular circumstances in the context of your career in mining and resources, please contact me on (07) 3007 2000 or email contact@resourcesunearthed.com.au
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in mining and resources.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.
