Using super to buy a home in Australia

• The First Home Super Saver (FHSS) scheme allows you to access up to $50,000 from voluntary super contributions to help you purchase your first home. 
• These voluntary contributions may attract beneficial tax treatment and investment returns that could help boost your savings.  
• Complying with superannuation legislation and regulations is complex, so its important to do your research and seek professional advice. 

Buying a home keeps getting harder. Superannuation may be able to help. 

 Buying a home in Australia has always been difficult, but every year it feels like it gets that little bit harder.  

 Over the 30 years to 2022, housing values in Australia rose 382% or 5.4% annually. Despite, rising interest rates and growing economic uncertainty in 2023, average growth was 8.1%. (Source: CoreLogic)

 While past performance is not a guarantee of future performance it takes a bold person to be against multiple decades of growth.  

 If you’ve been struggling to find a home that meets your needs and budget, then you might consider the following ways to access your superannuation and increase your buying power: 

1.  First Home Super Saver Scheme (FHSS) 
2.  Accessing superannuation for those over the age of 60 

What is Superannuation? 

Superannuation is often referred to as ‘Super’. It’s the money that’s contributed by your employer to a dedicated account, which is then invested by your Superannuation Fund. 

Presently, the super guarantee rate is 11% of your salary (pre-tax), which means your employer must contribute this amount to your super fund in addition to paying your salary.  

In addition, the super guarantee, there are a variety of ways you can make additional voluntary contributions to increase your super.  

The first $27,500 per year of super guarantee and voluntary contributions are concessional (pre-tax) and taxed at only 15%. Contributions above this amount are non-concessional (post-tax) and taxed at a higher rate. 

Over time, these regular contributions and investment returns can really add up. This is important because the Australian Government intended super to help fund you in retirement.  

For this reason, you can only access your super once you retire or have turned 65. Having said this, there are some circumstances where you can access your super early. These include: 

• Compassionate grounds 
• Terminal medical condition 
• Severe financial hardship 
• Temporary or permanent incapacity 
• Balances less than $200
  

When it comes to purchasing property, there are also a couple of other options. 

First Home Super Saver (FHSS) scheme

The First Home Super Saver (FHSS) is a scheme regulated by the Australian Government and is designed to help you save money for your first home. It utilises the tax and investment benefits of super by allowing you to access up to $50,000 of voluntary contributions you’ve previously made into super plus deemed earnings on these contributions. 

To access the FHSS there is a 4 step process you must follow:  

1. Make eligible contributions (up to $15,000 per financial year) in the form of voluntary contributions to your super fund.
2. Before signing a contract on a home, apply to the Australian Taxation Office (ATO) for a FHSS determination.
3. Apply for and receive a FHSS release before (up to 12 months) or after signing a purchase contract (within 14 days). 
4. Receive your FHSS release amount from the ATO. 

Eligibility

There are also some eligibility criteria that you need to be aware of: 

• You must be over 18 years old when requesting a determination or release under the FHSS scheme.
• You must be a first home buyer and have never previously owned a property in Australia.
• You intend to occupy the property for at least 6 months within the first 12 months of ownership.
• You haven’t previously made a FHSS release request.
  

The good news is that eligibility is available for individuals, rather per property. This means couples can each access their own eligible FHSS contributions for the same property. 

Benefits of the First Home Super Saver Scheme 

 While a little complex to understand at first, the First Home Super Saver scheme offers some real benefits to first homebuyers:  

• Voluntary contributions (e.g. salary sacrifice), where concessional, can reduce your taxable income and, ultimately how much personal income tax you pay.
  
• Increases your savings by reducing the tax rate on contributions and deemed earnings from your marginal tax rate to 15%. 
  
• All purchasers are eligible for the FHSS, so the benefits can be cumulative for a couple or siblings that are buying together. 

Downsides of the First Home Super Saver Scheme 

The First Home Super Saver scheme comes with some trade-offs that you should consider before deciding on it. 

Funds that are voluntarily contributed to your super can only be accessed for purchasing your first home. Where you decide to not access these funds for this purpose, they will remain in your super until you retire. 

This means a decision to use the FHSS now will stop you from changing your mind and using those funds for things like buying a new car or going on a holiday. Similarly, the requirement to live in the home purchased under the FHSS could be restrictive if you change your mind and want it to be an investment property.  

Another limitation of the First Home Super Saver Scheme is the annual concessional contributions limit of $27,500  on your super. If you’re a high-income earner, you may not be able make significant additional voluntary contributions at the lower tax rate of 15%.  

Finally, the FHSS is not a simple scheme to understand and access. The application process will require you to spend time and effort on top of what’s required to secure finance or a home loan, prepare for settlement and organise moving into your new home. 

It is worth noting that there are some technical changes to the FHSS scheme (taking effect on the 20th of September 2024) that add some flexibility to how the scheme is administered by the ATO. This should make it easier for homebuyers to make, alter and withdraw their requests for determinations and releases. 

The fine print/rules 

While the FHSS scheme gives first home buyers another way to get into a home of their own, there are a significant number of rules that determine how much will be released from your super, as well as compliance requirements. 

To read about these in detail, head over to the ATO’s website.

Accessing your superannuation when you’re over the age of 60

It might be time to downsize, but you want to move into a suburb closer to family or with better amenities. It might be that you’ve been renting and want the security of your first home.  

If you’re nearing retirement or have already done so, the good news is that your super can help you buy that new home. 

Essentially, you can withdraw your super when you either reach the age of 65, or 60 (preservation age) and have retired. Once you qualify for this, there are no restrictions on how you can use your super. 

Depending on your super balance and individual circumstances your super may be sufficient to help you buy the home that will serve you through the next phase of life.  

Seek financial advice before making any decision 

 The information in this article is general in nature and does not constitute advice.  

 With any big financial decision you should seek advice from experts, including, but not limited to a lawyer, qualified accountant and/or financial planner.