By Thomson Reuters Tax & Accounting
The maximum amount individuals can take out of their super under the First Home Super Saver Scheme will be increased from $30,000 to $50,000 for any release requests made on or after 1 July 2022. Initially, the scheme was envisaged as a tax-effective way for first home buyers to save for a deposit. The increase in the maximum releasable amount presumably reflects the rapidly escalating housing price increases. The scheme is available to both first home buyers and those intending to build their first home subject to certain conditions of occupation.
The cost of living pressures and high house prices mean that many people in Australia find it increasingly difficult to get on the property ladder. This cost is not confined exclusively to young people. Older long-term renters, particularly in the regions, have also been disproportionately affected due to the great migration to the regional areas driven by the COVID-19 pandemic.
Instead of making fundamental changes to investment/tax structures that drive house prices, the government has sought to solve the housing issue by allowing individuals to take money out of their super under the First Home Super Saver (FHSS) scheme. The scheme allows eligible first home buyers to apply to release voluntary contributions made to their super, along with associated earnings. The maximum releasable amount is currently $30,000 but will increase to $50,000 for any release requests made on or after 1 July 2022.
Individuals planning to use the scheme must be a first home buyer who will occupy the property purchased or intend to do so as soon as practicable, for at least six months within the first 12 months of ownership. FHSS scheme is also available to those planning to build their first home, provided the contract to construct the house is entered into within 12 months from the date of the super release request.
The first step in releasing eligible funds is to obtain an FHSS Determination from the ATO, which sets out the maximum amount that an individual can have released under the scheme. More than one FHSS Determination can be applied for, but once a request for release of amounts has been lodged, the individual will not be able to seek further FHSS Determinations. So, individuals must ensure that they have finished making all their voluntary contributions under the scheme before applying for a Determination. Of course, to check the accuracy of the Determination issued by the ATO.
A limit of $15,000 of eligible contributions can be released each financial year. Eligible contributions include any voluntary concessional and non-concessional contributions that have been made (i.e. salary sacrifice contributions and personal after-tax contributions). It does not include super guarantee, other mandated employer contributions, spousal contributions, or co-contributions, among other things.
The most important thing to note for individuals intending to use this scheme is that they must have an FHSS Determination before signing any contract to purchase. This includes pre-established homes and those planning to build their first home (i.e. the vacant land must not be purchased before an FHSS Determination is applied). If an individual signs a contract for any property (or interest in a property including land), they will not be eligible to request an FHSS Determination and hence not eligible for the scheme.
For individuals who have an FHSS Determination and subsequently sign a contract to purchase, a valid release request must be given to the ATO within 14 days. After the release of money, if an individual does not sign a contract to purchase or construct a home within 12 months, the ATO will generally automatically grant an extension of time for a further 12 months. Individuals also can choose to recontribute the amount back into their super funds or to keep the money and pay a flat 20% tax on assessable FHSS released amounts.
Need extra money for a deposit?
If you would like to use the FHSS scheme to help boost your deposit to purchase a home this year, we can help you work out the maximum amount you can release under the scheme or help put a plan in place to make eligible contributions to get one step closer to your goal. Contact our team today firstname.lastname@example.org
**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.