Free Money for First Home Buyers
Free Money for First Home Buyers
Free money – what’s not to like?
- are over 18
- have not previously owned property in Australia (it doesn’t matter if your partner or other joint buyer has)
- earn more than $40,000 annually (it’s just not worth bothering on less than this)
- have not previously released FHSS funds
- intend to live in the home you are buying as soon as practicable and for at least six months of the first 12 months you own it.
What you need to know
Some numbers will help clarify.
So if some is good, more must be better – right?
- firstly, you get to do only one withdrawal in a lifetime.
- a lifetime limit of $30,000 in contributions is eligible for withdrawal
- an annual limit of $15,000 in contributions is eligible for withdrawal
- the normal annual limit ($25,000) on concessional (that is, those contributions eligible for a tax deduction) applies to the total super contributions you can make in any one tax year. This includes the normal contributions your employer makes which amount to 9.5% of your salary. This means that if you earn over $105,260, your employer will contribute more than $10,000 in super, so you won’t be able to access the full annual limit of $15,000 for this scheme.
What if I don’t spend it on a home after I withdraw it?
- apply for an extension of time of up to a year. You are allowed to do this but don’t bet on actually being granted an extension.
- put the money back into your super fund
- pay an additional amount of tax on the amount of the withdrawal – 20% of the amount you withdrew. This will put you in a slightly worse position than if you’d just saved the money another way. This penalty amounts to about $10 for each $500 you would have saved.
If you have a HECS debt
If you are close to a tax rate threshold your benefit will be reduced
What you need to do now
- Check whether your super fund is participating in the scheme. That is that it will allow you to make withdrawals under the First Home Buyers Super Scheme.
- Ask your employer whether they will allow you to “Salary Sacrifice” into super AND that if you do they won’t change the amount of employer contributions they will make.
- Advise your super fund which investment option you would like your contributions to be invested in. You may need to consult an adviser.
- Periodically check your contributions are arriving in your fund and being invested in accordance with your instructions. Your employer must make these contributions quarterly.
What you need to do when you want to spend your savings
- When you are ready to buy your first home, apply to the ATO to withdraw your extra contributions. You need to do this before you sign the contract to buy your home.
- You can apply online through your MyGov account. This will also give you an instant estimate of how much you will get.
- A day or so later you will receive a manual form in your MyGov inbox. Complete this form and send to the ATO.
- You can monitor the progress on MyGov and a couple of weeks later you will see the money leave your super account.
- The cash will arrive in your bank account a couple of weeks later
- You must spend the money within a year of withdrawing it. If you don’t you can apply for additional time (don’t bet on getting it, though), return it to your super fund or pay some extra tax and keep it.
- Enjoy your new home.
Vince Scully | Founder and Chief Sherpa
With over 25 years in Financial Services from consulting to management, Vince Scully is the go-to guy for wealth management and financial advice. Vince founded the Calliva Group; a fund manager, product issuer, advisor and lender to Government and private clients. Vince is an advisor to the Wealth Management Industry, and prior to his role as CEO at Calliva, a senior member of Macquarie bank’s infrastructure team.