FHSS: Your guide to withdrawing funds from 01 July 2018
The First Home Super Saver (FHSS) scheme was introduced by the Australian Government in the Federal Budget 2017–18 to assist first home buyers save a deposit faster for your first home by allowing you to contribute funds to your super fund for the purpose of your first home deposit. From 01 July 2018 eligible aspiring first home buyers will be able to withdraw any contributions made in the previous financial year.
What is the FHSS?
The FHSS is a new Government Scheme designed to help Australians boost their savings tax effectively for the purpose of buying a first home. Essentially, the Scheme (which has strict rules) allows eligible individuals to build a home deposit inside super at concessional (discounted) tax rates. These concessional tax rates, together with potentially stronger investment returns achieved inside super (rather than saving for a deposit in a typical bank account earning low interest) work together to help individuals save a home deposit sooner (in most cases).
How does the FHSS work?
You can start using the scheme by entering into a salary sacrifice arrangement with your employer to make voluntary contributions or by making voluntary personal super contributions. You can contribute into any super fund and you will be able to use multiple funds if you choose to do so.
How do I apply to release my FHSS funds?
It is important to ensure you get your funds released before you decide to sign a property purchase contract.
When you are ready to buy your first home, you need to apply to the Commissioner of Taxation for an FHSS determination and a release. You will be able to apply from 1 July 2018. You can do this by applying online using your myGov account linked to the Australian Taxation Office (ATO).
Maximum withdrawal amount
The maximum amount you are able to release is the sum of your eligible contributions, taking into account the yearly and total limits, and associated earnings. This amount includes:
- 100% of eligible non-concessional contributions
- 85% of eligible concessional contributions
- associated earnings calculated on at the current deemed rate of return
The good news is that when you apply for the determination the ATO will advise you of the maximum release amount. However, you need to ensure you apply for the release on one occasion only, as the ATO doesn’t allow multiple release requests.
Getting your FHSS funds
The ATO will issue a release authority to your super fund/s requesting they send your FHSS release amounts to the ATO. The ATO has advised that it can take 25 days for the whole process to take place, i.e. for the super fund to transfer the funds to the ATO and for the ATO to transfer them to you.
Before sending the money to you, the ATO will withhold the necessary tax and if you any tax debts owing to the ATO, these will also be deducted against your FHSS funds. However, if you have any students loans (i.e. HECS or HELP debt), then these debts won’t be deducted from the FHSS funds.
The ATO will also send you a payment summary at the end of the financial year, requiring you to include this income in your next tax return – please note, you will be eligible for a 30% tax offset.
Post receiving your FHSS funds
Once your savings have been released into your account, the ATO gives you 12 months to purchase or start constructing your first home. The following conditions apply:
- The first home must be a residential premises
- If you intend to purchase a vacant block of land to build a home on, it is the contract to construct your home that must be entered into within the 12 months. Please note you could not have purchased the block of land before the FHSS scheme began
You must genuinely intend to occupy the property as your primary place of residence by:
- occupying or intending to occupy the property as soon as practicable after purchase
- occupying or intending to occupy the property for at least six of the first 12 months from when it is practicable to occupy it
What if I can’t find or purchase my first home within 12 months?
If you do not sign a contract to purchase or construct a home within 12 months from the time the first amount is released to you, you can either:
- apply for an extension of time for a maximum of another 12 months
- recontribute an amount into your super fund/s. This amount must be a non-concessional contribution and be at least equal to your assessable FHSS released amount, less any tax withheld. This amount is as per the payment summary issued to you by the AT
- keep the released amount and be subject to an FHSS tax i.e. 20% of your funds
How do I get more information or assistance?
A good place to start is to talk to a first home buyer expert, i.e. FHBA Coach, who can assist you with a range of matters including the following:
- Savings assistance (including FHSS questions)
- Home loan advice
- Questions on the property buying process
- Determining the type of property you are looking to buy.
If you are looking to buy in this financial year it is a good idea to request the release of the FHSS funds now as it may take up to a month to get the funds – simply speak to an FHBA Coach to help you get this process started.
For more information provided by the ATO in relation to withdrawing our FHSS funds, please click here.
First Home Buyers Australia