How will the First Home Super Saver scheme help me get into the property market?

Mar 28, 2022

As interest rates begin to rise, young Australians are watching the property market with a close eye, in the hope that this might present an opportunity for them to get into the market with prices beginning to steady, and even drop in some cases. While prices are still quite high and borrowing is still a challenge for most, saving a significant deposit is more important than ever.

For first home buyers across Australia, there are various government incentives and initiatives that can help.  With interest rates still relatively low, and rents on the increase, it could still be more beneficial for a young couple to take the plunge into home ownership rather than pay rent.

While superannuation is designed to help you save for a comfortable retirement, there are some opportunities to withdraw from these savings early to help you get ahead. During the pandemic the Federal Government allowed eligible Australians to withdraw two lump sums to assist with their day-to-day cost of living expenses if they had lost their income during the pandemic.

The other opportunity to withdraw money early from your super is via the First Home Super Saver (FHSS) scheme. This scheme was first introduced in 2017, with amendments and refinements over the past few years to improve the scheme. The scheme allows you to make voluntary contributions into your super fund to save for your first home. You can then apply to release these contributions to help purchase your first home.

You can apply to have a maximum of $15,000 of your voluntary contributions from any one financial year included in your eligible contributions to be released under the FHSS scheme and from July 2022, the total contributions you can withdraw will increase from $30,000 to $50,000 in contributions across all years. Keep in mind that the maximum contribution per year has not changed and is still $15,000 so to take full advantage of the scheme you must plan well ahead in the lead up to your first home purchase.

As the FHSS scheme allows each individual to voluntarily contribute up to $50,000 to their super and withdraw this amount to buy their first home, for couples both parties can use the scheme which means they can withdraw up to $100,000. Note that this only applies to voluntary contributions not the mandatory super contribution made from your employer.

In order to take advantage of the FHSS scheme, you must meet the following eligibility requirements:

· It must be for the purchase of your first home.

· You must intend to live in the home you purchase.

· You intend to occupy the property for at least six months within the first 12 months of owning it.

· You must apply for the FHSS scheme before signing a contract for your home.

· You can only request the FHSS scheme once and it must be for the purchase of a house in Australia.

· You have one year from the date of release of the funds to utilise the funds to purchase your home.

Taking advantage of the FHSS scheme will not only help you save money in your super for your deposit but also it will allow you take tap into super’s tax breaks to give your deposit a healthy boost. Voluntary contributions can include before-tax contributions, such as salary sacrifice or after-tax contributions. By saving through you super, you pay less tax than saving outside super, which means you can build your deposit up faster. Before-tax contributions are taxed at 15% in super, whereas if you save outside your super you will pay tax at your marginal rate (up to 48.5%). After-tax contributions, which have already been taxed outside super, are not taxed again inside super.

The FHSS scheme can be combined with other government support to help first home buyers

For eligible first home buyers, it might also be possible to utilise the FHSS scheme and receive additional assistance under the Federal Government initiatives such as the First Home Loan Deposit Scheme (New Homes) or Family Home Guarantee. There are also several state-based initiatives, concessions and grants that can be combined with the FHSS scheme.

First Home Loan Deposit Scheme (New Homes)

The First Home Loan Deposit Scheme is a Federal Government initiative that lowers the total deposit necessary to secure a loan. Most banks and lenders require a minimum deposit of 20% of the property’s value from the borrower to be exempt from Lenders Mortgage Insurance (LMI). This scheme allows first home buyers who can’t reach that threshold to take out a loan if they have saved at least 5% of the value of the property they are buying. The government will underwrite the loan so that borrowers do not have to pay LMI. When approved for the scheme, the National Housing Finance and Investment Corporation (NHFIC) in essence becomes ‘guarantor’ on up to 15 percent of your deposit.

Family Home Guarantee

Another Federal Government scheme is targeted at single parents and helping them purchase a family home. This initiative isn’t just for first home buyers but is more about trying to assist single parents of at least one dependent child who find themselves in difficult financial situations when they are the sole income earner. The scheme allows an eligible single parent to buy a home with just 2% deposit and avoid LMI. This scheme started in July 2021 and at this stage will run until 2025 with only 10,000 places offered during this period.

This NHFIC fact sheet can help you understand more about this scheme.

Stamp Duty Concession (now known as one-off transfer duty)

If you don’t qualify for any of the previous grants outlined, but are a first home buyer, you might be able to take advantage of a one-off transfer duty discount or exemption. This discount or exemption varies from state to state and also depends on what type of property you purchase and the purchase price.

State based initiatives are quite significant, especially when it comes to the most expensive places in Australia to buy a house – Sydney and Melbourne.

In a recent media release, NSW government announced The First Home Buyer Choice package as part of their housing package for the 2022-23 NSW Budget. This scheme allows first home buyers to choose between an upfront payment or a smaller annual property tax when it comes to stamp duty.

First homeowner grants

In NSW, Victoria and WA, first home buyers can access the First Homeowners Grant which is a lump sum of $10,000. There are conditions on the type of home you buy, as well as the value and condition of this home. Further details can be found on the NSW Revenue website and for Victorian first home buyers, more information is provided on State Revenue Office Victoria’s website.

In QLD and SA, the grant will provide first home buyers up to $15,000 with specific conditions met. See more information here for QLD and here for SA.

Victoria’s new Homebuyer Fund

The recently launched Homebuyer Fund will see the Victorian Government help 3,000 homebuyers into the market sooner, in exchange for a share in the property. It’s known as a shared equity scheme.

Homeowners will need to have a 5% deposit, with the government chipping in up to 25% of the home’s value. Aboriginal and Torres Strait Islander Victorians can apply for the fund with only a 3.5% deposit.

Again, with this initiative there are a range of eligibility requirements and ongoing obligations. To find out more about click here.

With the variations across the country of support, if you are thinking about purchasing a new home in the next few years, it is advisable to start planning early and seek professional financial advice.

Contact your local Tribel Advisor to see which of these schemes and initiatives could help you achieve your financial goals sooner.

All of the material published on this web site is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances

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