Stepping on the Property Ladder: Using Your Super for a Home Deposit with FHSS
Saving for a home deposit can feel like an uphill battle. Between rent, bills, and everyday living expenses, building a sizeable sum can take years. But what if you could tap into your superannuation (super) to give your savings a boost? The Australian Government's First Home Super Saver Scheme (FHSS) allows eligible first home buyers to access a portion of their super for a home deposit.
Unlock Faster Homeownership with the FHSS
The FHSS can be a game-changer for aspiring homeowners. Tax advantages, forced savings, and increased borrowing power - all working together to help you get on the property ladder sooner.
What is the FHSS?
The FHSS is a scheme designed to help first home buyers bridge the deposit gap. It allows you to make voluntary contributions (extra payments on top of your regular super) into your super specifically for a home deposit. These contributions are concessional (tax-advantageous) or non-concessional (after-tax), and when you're ready to buy, you can withdraw them along with any accumulated earnings to use towards your deposit.
Benefits of Using the FHSS
Tax advantage: Concessional contributions are taxed at a lower rate than your income tax, meaning you get more bang for your buck.
Forced savings: Locking away your contributions in super reduces the temptation to spend them elsewhere, accelerating your deposit goals.
Increased borrowing power: A larger deposit increases the amount you can borrow for your mortgage, potentially giving you access to a better property or location.
Using Your Super for a Home Deposit: A Step-by-Step Guide
Ready to See if You Qualify?
Check the Australian Taxation Office (ATO) website for details on FHSS eligibility requirements link to ATO website.
Here's what you need to do next:
Eligibility Check: Make sure you meet the FHSS eligibility requirements. You must be a first home buyer intending to purchase a permanent residence in Australia. You'll also need to meet certain income caps.
Choose Your Contributions: Decide how much you can contribute each year. The maximum concessional contribution is $15,000, and the total FHSS cap is $50,000. You can also make non-concessional contributions (up to your contribution caps) if you have the extra funds.
Talk to Your Super Fund: Let your super fund know you intend to use the FHSS. They can guide you on making eligible contributions and the withdrawal process later.
Making Voluntary Contributions: There are two ways to contribute: salary sacrificing (before tax) through your employer or making personal contributions (after tax) directly to your super fund.
Buying Your Home: When you're ready to purchase, you'll need to lodge an FHSS determination application with the ATO. Once approved, you can apply to your super fund to release your eligible contributions and earnings to use towards your deposit.
Important Considerations
Reduced Retirement Savings: Using your super for a deposit means less money accumulating for your retirement.
Impact on Investment Earnings: Super funds are invested, and past performance doesn't guarantee future results. There's a chance your contributions may not grow as much as expected.
Long-Term Commitment: The FHSS is a long-term strategy. Be sure you're committed to buying a home within the scheme's timeframe.
Conclusion
The FHSS can be a powerful tool for first home buyers. By carefully considering the benefits and drawbacks, you can decide if it's the right strategy for your homeownership journey. Remember, talking to a financial advisor can be a great way to develop a personalised plan to achieve your property goals.
Supercharge your home buying journey. Speak to a financial planner today!