Q. I am currently saving to buy my first home. I am looking to use the First Home Super Saver Scheme (FHSSS). How does it work and how, do I take advantage of the incentive?
A. The FHSSS applies to voluntary personal and employer contributions made in excess of the 9.5% Superannuation Guarantee to Superannuation from 1 July 2017. In order to qualify, you must be 18 or over and have not previously owned property in Australia. Up to $15,000 per financial year and $30,000 in total can be contributed to Superannuation per person. Both members of a couple are eligible to take advantage of this measure to buy their first home. Effectively a couple is limited to a voluntary contribution limit of $30,000 per financial year and $60,000 in total.
Contributions can be made as pre-tax Concessional contributions or can be made as post-tax Non-concessional contributions. The contributions will count against the applicable Superannuation contribution caps. The Concessional contribution cap which includes Employer contributions or personal deductible contributions will be $25,000 and the Non-concessional contribution cap (personal after-tax contributions) will be $100,000 per financial year.
Concessional contributions will be taxed at 15% when made to the fund. Non-concessional contributions can be made tax free. 100% of your voluntary non-concessional contributions and 85% of your voluntary concessional contributions count against the contribution limit.
Earnings available for withdrawal will be calculated at a deemed rate of return referred to as the Associated Earnings rate. The Associated Earnings rate will be calculated on the Shortfall Interest Charge which will be 4.96% effective 1 July 2018. Note that the Associated Earnings rate could be greater or less than the actual rate of return earned on the funds.
To qualify to have the funds released, the purchase must be a residential home or land that you intend to build a home on. You must occupy the property for at least 6 months in the first year of ownership after it is practical to do so.
Q. What is the process of withdrawing Super under the First Home Super Saver Scheme (FHSSS)?
A. The first step is to apply for a determination of your FHSSS entitlement from the ATO. The ATO will advise you the maximum FHSS release amount available, the associated earnings and the tax to be withheld.
You can request a determination on multiple occasions, in case you change your mind on withdrawing the funds,
Once you have received a determination, you then apply for a release of the funds when you are ready to purchase your home. Unlike applying for a determination, you can only apply for a release once.
You can apply for the release of the FHSSS maximum release amount stated in the determination, or you can choose a lower amount.
Before you request a release of your savings, you should be satisfied that the determination from the ATO is correct and there are no errors. If you think the determination is incorrect, you need to resolve this with the ATO before applying for a release.
Once your withdrawal request is received, it will take approximately 12 business days to process your withdrawal request. The ATO will then issue a release authority to your Superannuation fund. Your fund will then send the requested release amounts to the ATO. The ATO will then withhold the appropriate amount of tax, and send the balance to your nominated bank account.
The withholding tax will be calculated at your marginal tax rate less a 30% tax offset or 17% if the ATO is unable to estimate your expected marginal rate.
The ATO will issue a payment summary that shows both concessional and non-concessional contributions made, the associated earnings and the tax withheld.
When you lodge your tax return you will include the FHSS released amount shown on your payment summary as assessable income in your income tax return. You declare this for the year you made your request for release.
Once your savings have been released, you have up to 12 months to sign a contract to purchase or construct a home. If you do not sign a contract to purchase or construct a home within the 12 months, you can either apply for an extension of time of up to a maximum of a further 12 months or recontribute the amount into your super fund. This must be at least equal to your assessable FHSS released amount, less any tax withheld by the ATO.
You must notify the ATO if you either sign a contract to purchase or construct a home or recontribute the amount into your super fund or you will be subject to FHSS tax. This is an additional tax equal to 20% of your assessable FHSSS released amounts.