Saving tax using the First home super saver scheme (FHSSS)
Do you want to buy your first home and save on tax at the same time? If yes, then you need to keep reading about the First Home Super Saver Scheme (FHSSS) and how this can work to your advantage.
In the 2017-2018 Federal Budget, the First Home Super Saver Scheme (FHSSS) was introduced. If you haven’t already heard of the FHSSS, it was a scheme introduced to help first home buyers to build a deposit within their superannuation fund whilst also giving them a tax cut at the same time.
The FHSSS allows you to make voluntary contributions to your super fund, which you can then withdraw at the time you are going to purchase your first home. In the 2020-2021 Federal budget, the cap was increased from $30,000 to $50,000. An individual can voluntarily contribute up to $15,000 per year, if you are a couple, then this can obviously increase to $30,000 per couple and you can release up to $50,000 from each superfund, totalling to potentially a joint deposit of $100,000. You will also be able to withdraw ‘interest’ on top of your voluntary contributions. Please keep in mind, these contributions available for withdrawal DO NOT include the superannuation contributions made your employer.
When it comes time to purchase your first home, before you sign your contract you need to have applied for and received a FHSSS determination from the ATO. You can do this online using your MyGov account and the ATO will tell you your maximum amount you are able to withdraw under the FHSSS. When you receive the amount, there will be a payment summary to include in your tax return the year you withdraw the contributions.
So, how does this save me tax?
These voluntary contributions are treated as a tax deduction in your personal tax return. If you chose to contribute $10,000 in one year, then you would be able to reduce your taxable income by this amount and save tax at your marginal tax rate. You will need to contact your superfund or completing a Notice of intent to claim tax deduction form, you can find these here: https://www.ato.gov.au/Forms/Notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/
How do I make a voluntary contribution?
You will need to contact your nominated superfund to check they will release the money under the scheme. They will be able to point you in the right direction with payment details for you to make these voluntary contributions.
As we are approaching the end of the financial year, now is the time to contact your accountant and prepare a tax plan to find out how much this will benefit you this year. Whilst finding out how much the FHSSS can reduce your tax bill this year, ask them to also run you through the FHSSS in more detail!
Please contact us today for a free consultation and quote to prepare a tax plan for you before the end of the financial year!
Disclaimer: This article is for educational purposes and is general advice only and should not be used to make investment or taxation decisions. Before making any investment or taxation decisions, you should speak to your financial advisor or accountant who will be able to tailor advice to your personal situation. Reach out to one of our in-house specialists today! All information is correct at the time of writing but may vary from year to year, and as legislation and interpretations change.
