How to use your super fund to save for your first home

Okay, let’s start at the beginning. Superannuation which is commonly called super is designed for Australians to be able to support themselves during their retirement; basically, savings that can't be used until you are over 60.

But did you know that first home buyers can save for their first home within their superannuation fund?! Giving first home buyers the opportunity to put pre-tax earnings into your super, then putting it towards your home deposit. Is your mind blown or is this common knowledge?

You don’t know what you don’t know. This is one of the core purposes of Stiletto Staircase’s motivational speaking sessions with high school students - to inform and empower young people with knowledge to make the best financial decisions for their future, independently.

Tax-free, super, and first home buyers grant may as well be another language for today’s youth. Do our kids even understand what super is? What a payslip looks like? What tax is? How big of a deposit they might need?

The first home super saver scheme, also known as FHSS, was introduced by the Australian Federal Government in order to help first home buyers save and have access into the housing market, also known as ‘the Australian dream’.

The gist of the scheme is that you can make voluntary contributions (which is a fancy term for putting extra payments into your super fund on top of the 9.5% your employer puts in) to save towards your first home. The biggest kicker here is that making voluntary contributions does mean you pay no tax at all; it means that you pay a smaller amount of tax than what’s on your usual payslip. Then once you're ready to buy your dream first home you request a release of those funds (which can only be done once).

There are various caveats of course, such as you can only use this scheme if you are a first home buyer and both of the following apply to you:

• You either live in the premises you are buying, or intend to as soon as practicable.

• You intend to live in the property for at least six months within the first 12 months you own it, after it is practical to move in.

It must also be noted that 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 up to a total of $30,000 contributions across all years.

Other key considerations worth noting are that the home must be in Australia, and you must apply and receive approval via the Australian Taxation Office (ATO) prior to signing the contract. There are additional finer details worth looking up on the ATO website if you are considering this as a savings option (always do your research!)

It could be argued that this is a tactical and resourceful way for the government to keep the housing market and economy going, whilst encouraging every individual to become or remain employed, particularly the younger demographic. Providing a tax break for Aussie’s saving for the purchase of their first home on Australian soil is of course beneficial, but the real achievement here that I can see is that of having young people discuss and consider superannuation from a new perspective and how making additional contributions will work for them in a shorter time frame outside of retirement. Super and retirement have always been distant and boring concepts for our youth, so at the very least having them consider / talk / investigate these important financial topics and how these concepts will impact them, is a win.

To have the available option to save via the FHSS means that you now have the option to save using pre-tax contributions, the biggest benefit to those that take it on is that they have a hell of a lot more savings than someone else trying to save the same amount of money after their pay goes into their account and standard tax is taken out, leaving you to try and keep part of what's left and not spend it on that tempting discretionary purchases.

---

The information in this blog is general in nature and does not take into account your personal financial situation. It is for educational purposes only, and does not constitute formal financial advice. You should always seek personal financial advice that is tailored to your specific needs. Facing financial hardship? Call the National Debt Helpline on 1800 007 007