Calm down! I’m not swearing at you! Instead, I am talking about the little known savings scheme set up by the Government that you may not have been aware of.
The FHSS, or the First Home Super Saver scheme, was passed through the Australian Parliament in the 2107-2018 financial year. However, it seems to have fallen between the cracks, with a number of first home-owners not being aware of this additional means of savings.
Let us give you the run-down of this unique scheme and work out if it’s something you should consider for your first home.
So, what is the FHSS?
It is a voluntary contribution of additional income, either before or after tax, towards your superannuation account, for the purpose of being available as extra funds towards the purchase your first home - “first” being the operative word.
Who is eligible?
Unfortunately, not everyone is eligible for the FHSS. The obvious ones first: you must be 18, have been working for a long period of time and an Australian citizen.
Next, as the name suggests, this scheme was designed for first home owners. Those that have never owned any property within Australia. When I say any property, I really mean any – doesn’t matter if it was an investment, vacant land, commercial purchase or a time-share with the mates - if you have been on a title, you are ineligible for the FHSS.
To be eligible, you also need to live in the property that you have purchased with the FHSS scheme for at least 6 months within the the first 12 months of purchasing. No purchasing of the property and then renting it out to your friends!
How does it works?
To get your FHSS started, you can approach it in one of two ways.
- You can either approach your employer to set up a salary sacrifice agreement with your wages. This is where an employer will submit an amount of funds to your superannuation account before any tax is applied to your wage.
- You can make these additional payments yourself from your after-tax wage payment. This is known as an extra contribution.
The major difference between the two is how the tax is withheld. If you start a salary-sacrifice arrangement, this decreases the amount of tax taken out of your wage, which means more money in hand for you. This results in less tax paid than an after-tax contribution. However, if you make an after-tax contribution, you can sometimes claim this on your tax return and result in a bigger tax refund.
Once you have started contributing extra amounts to your superannuation, remember to track your account to ensure you know how much you have got saved.
When you are ready to access your extra superannuation fund savings, you can do so through your MyGov account on the Australian Tax Office website.
Some things to consider
As great a saving opportunity this appears to be, there are a number of additional things to consider before going down this path.
Firstly, double check with your superannuation fund that this is something they will do and double-check on any fees or charges associated with it. As we all very well know, nothing in this world is free and some small charges for paperwork may apply.
Next, when you finally access the funds, this is going to reflect in your income received for the year. This effectively means that come tax time, these additional funds will need to be included in your tax return. The extra funds may push you into a taxation bracket that you are not normally in, which could result in more tax being owed.
Confused? Don’t blame you at all! This is why I would stress that if you decide to go down the FHSS route, you talk to either an accountant or financial advisor to get advice on how to approach this based on your financial circumstances.
Finally, be aware. You need to access the funds prior to signing a contract to purchase a home and you need to use these funds within 12 months or you will be looking at having to to pay it back or pay additional tax.