Can I Use My Super for a House Deposit?

In Australia, the First Home Super Saver (FHSS) Scheme provides a structured pathway for eligible first-time homebuyers to save for a home deposit within their superannuation fund. This government initiative assists in accumulating a deposit more efficiently by utilizing the tax-concessional environment of superannuation. The scheme aims to make homeownership more accessible for those looking to enter the property market for the first time.

Understanding the First Home Super Saver Scheme

The First Home Super Saver Scheme helps first-time homebuyers accumulate a deposit for their initial property purchase. It allows individuals to make voluntary contributions into their superannuation fund, which offers a lower tax rate compared to standard savings accounts. This provides a tax-effective way to save for a home deposit.

The scheme involves making additional, voluntary contributions to one’s super fund beyond compulsory employer contributions. These voluntary savings, along with associated earnings calculated by the Australian Taxation Office (ATO), can later be withdrawn for purchasing a first home. It functions as a dedicated savings vehicle, distinct from general superannuation balances intended for retirement.

Eligibility for the Scheme

To participate in the First Home Super Saver Scheme, an applicant must be 18 years of age or older when requesting a determination from the Australian Taxation Office for fund release. This age requirement ensures the individual has reached legal maturity for property transactions. The applicant must never have previously owned property in Australia, including various forms of real estate such as investment or commercial properties. Additionally, the individual must not have previously made a successful request for a First Home Super Saver release.

The scheme requires an intention to occupy the purchased property as a primary residence for at least six months within the first 12 months of ownership. The property must be a residential home located in Australia. The scheme excludes investment properties, vacant land (unless a contract to build a home on it is entered into), houseboats, or motorhomes.

Making Eligible Contributions

The scheme involves making voluntary contributions to a superannuation fund, distinct from mandatory employer contributions. The two types of eligible contributions are voluntary concessional contributions and voluntary non-concessional contributions.

Voluntary concessional contributions come from pre-tax income, such as salary sacrifice or personal contributions for which a tax deduction is claimed. These are taxed at 15% within the super fund. Voluntary non-concessional contributions are made from after-tax income and are not taxed within the super fund.

An individual can contribute up to $15,000 in eligible contributions per financial year. The total amount of contributions counted towards a First Home Super Saver release is capped at $50,000. Individuals should maintain accurate records of their voluntary contributions for release applications.

Requesting a Super Release

To request fund release, apply for a First Home Super Saver determination through the myGov online portal, linked to the ATO. This determination confirms the maximum amount an individual can withdraw, including associated deemed earnings.

After receiving a determination, and when ready to purchase a home, submit a formal release request to the ATO via the same portal. The application requires confirming eligibility, specifying the amount to be released, and providing bank account details. The ATO processes this request and issues a release authority to the individual’s superannuation fund.

The super fund transfers the specified amount to the ATO. The ATO consolidates these funds, deducts any applicable taxes, and then disburses the net amount directly to the individual’s nominated bank account. This process takes between 15 and 20 business days.

Taxation and Using Released Funds

When funds are released under the scheme, the assessable First Home Super Saver amount, including eligible contributions and associated deemed earnings, is included in the individual’s assessable income for the financial year of the release request. To mitigate the tax impact, a 30% tax offset is applied to this assessable amount. This offset reduces the final tax liability on the released funds, effectively lowering the overall tax rate on these amounts.

After receiving the released funds, individuals must sign a contract to purchase or construct a home within 12 months from the date the release was requested. The ATO may grant a 12-month extension if a contract has not been signed. If the released funds are not used to purchase or build a home within the timeframe, the individual must either recontribute the assessable amount (less tax withheld) back into their super fund as a non-concessional contribution or face a First Home Super Saver tax. This tax is a flat 20% penalty on the assessable released amount.