Eligible Australians can withdraw up to $50,000 from their super using the First Home Super Saver scheme. (Source: Getty)
The First Home Super Saver Scheme (FHSS) offers first time buyers an opportunity to boost their savings to climb the property ladder. The scheme allows eligible Australians to invest extra in their super fund and then withdraw that money to help deposit. Here’s a simple guide to how the scheme works.
From July 1, 2017, eligible people could contribute to their super fund under the scheme and the first withdrawal was allowed from July 1, 2018.
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What are the eligibility criteria?
To participate in the scheme, you must meet certain criteria:
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You can’t withdraw any money until you’re 18 (though you can contribute from any age)
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The amount withdrawn should be for your first property
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you have not previously asked the Australian Taxation Office (ATO) to release any funds from the plan
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You must either be living in the premises you are buying, or intend to live in as soon as possible
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You must have an intention to live in the property for at least six months of the first 12 months after which it is practical to move into
Can I avail of this scheme if I am self-employed?
Yes, there is no restriction on who can avail the benefits of the scheme. Both employees and self-employed Australians can participate. You just need to fulfill the general eligibility requirements mentioned above.
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Exempt contributions to super include the amount your employer pays into super on your behalf, any amount you forgo salary or any amount you pay into super and a tax deduction through your tax return. Let’s claim
Your concessional contributions can’t exceed $27,500 per year and, as the name suggests, are taxed concessionally.
For example, if you contribute $15,000 to your super, you will reduce your taxable income by $15,000, saving tax at your marginal rate.
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If you’re a typical taxpayer at the 32.5 percent income tax rate, this means you’ll save $4,875 in income tax (the savings are greater for higher earners who pay taxes at higher rates) which means the contribution will actually ” Cost” is “you only $10,125.
The super fund will pay tax at the flat rate of 15 per cent on the contribution, which equals $2,250, leaving the fund with $12,750 after tax.
When the after-tax contribution is withdrawn, it will be taxed at your marginal rate minus 30 percent tax, which in our example equals a 2.5 percent tax charge, or $318.75 (ignoring any growth in the fund. may have occurred during the investment period).
In simple terms, you spent $10,125 on contributions and received $12,431.25 to put back into your home deposit, giving you a gain of $2,306.25 for just one year of contributions.
Is there a “maximum” amount that I can withdraw?
The maximum amount that can be withdrawn was increased from $30,000 to $50,000 of accumulated contributions in July last year.
Of this, no more than $15,000 can be attributed to contributions from any one fiscal year, which means you need to contribute over three years at the annual maximum of $15,000 before you can withdraw the $50,000 maximum.
While your super is in your fund, it will (hopefully) increase in value due to the investment performance of the fund, so you will also receive an additional amount that will correspond to the income on those contributions.
If you are a couple and you both meet the eligibility criteria, you can receive up to $100,000 jointly.
To withdraw your money, you must first apply to the ATO for a Home Super Saver determination and release. (Source: Getty)
What if I am buying the property along with someone who already has the property?
Your ability to access the plan is assessed only on your own circumstances and not on the circumstances of anyone else with whom you are buying the property.
Ideally, each of you will be a first time buyer and you will each be able to withdraw the maximum amount from your super to pay off the deposit. But if you’re shopping with someone who already owns it, you’ll still be eligible to withdraw from your super, even if the person you’re shopping with can’t.
Therefore, whether you are buying as part of a couple, with siblings or friends, each of you can use your own FHSS contributions to pay the deposit.
If either of you already owns a house, this will not stop the other person from being eligible to apply.
How do I withdraw my money?
When it comes time to withdraw your money to put it into your deposit, you need to apply to the ATO for an FHSS determination and release.
The ATO must issue you your FHSS amount before you can sign a contract on a property or you may be liable to pay FHSS tax.
The ATO will issue an authority to release your super fund. It will take around 25 working days for your funds to be released to your fund and the ATO will then pay it to you after deducting the appropriate amount of tax.
If you are looking for help or advice with your retirement, please feel free to contact us at H&R Block at any time to speak with one of our experienced financial advisors or tax advisors.
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Source: au.finance.yahoo.com
