The First Home Super Saver Hack

Welcome, to the Podcast! Our newsletter made easy! Please note, this podcast features AI-generated voices for your hosts, Mia Taylor and Leo Baker, bringing you expert insights from owner, Ben De Rosa, at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax – whether it's for your individual finances, or the complexities of your business. We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. So, if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Isaac Seidner says "I recently had the pleasure of working with Ben from Aevum Accounting, and I can’t recommend him highly enough. He was an incredible help with my tax return — professional, thorough, and genuinely easy to deal with. From the start, Ben took the time to explain everything clearly and made sure I understood each step of the process. He identified a few deductions I would have otherwise missed and made the whole experience stress-free. It’s rare to find someone who combines technical knowledge with such a high level of client service. I’ll definitely be coming back next year, and I wouldn’t hesitate to recommend Ben and the Aevum team to anyone looking for reliable, knowledgeable accounting support." Thank you for the amazing feedback Isaac! We love hearing from our clients. and a positive review gets our podcast started on the right foot. And we are back! Leo Baker here, and Mia, today we are talking about the great Australian dream, which for a lot of young people, feels more like the great Australian nightmare: saving up a deposit for your first home. It’s a massive challenge, Leo. But today we’re going to talk about a government-approved savings hack that can help you get there faster. We’re talking about the First Home Super Saver Scheme, or FHSSS. I love the sound of a savings hack! So what is this thing? Am I raiding my super? It sounds a bit scary. That’s a common misconception. You’re not raiding your existing retirement savings. The FHSSS is a special government initiative that lets you use your super fund as a tax-effective place to save your own money for your first home deposit. Think of your super fund as a high-interest savings account, but instead of high interest, you get big tax benefits. Okay, my interest is officially piqued. How does it actually work? How do I get money in? It starts with making voluntary contributions to your super. This is the crucial part – it can’t be the mandatory money your boss puts in. It has to be extra money you choose to put in yourself. The most effective way to do this is with what’s called ‘concessional contributions’. This is usually done through a salary sacrifice arrangement with your employer. Whoa, jargon alert! Salary sacrifice. What does that mean in simple English? It’s simple. Imagine your boss is about to pay you your salary. Instead of all that money going into your bank account, where it gets taxed at your normal, high income tax rate, you tell your boss to send a chunk of it directly into your super fund before tax. And why would I do that? Because that money going into your super fund is only taxed at 15%. For most young people, your normal income tax rate is 30% or more. So straight away, you’ve saved at least 15% in tax on the money you’re putting towards your house deposit. It also reduces your total taxable income for the year. Okay, that’s a clever trick. It’s like sending your savings through a secret, low-tax tunnel instead of the main highway where all the tax toll booths are. Are there limits to this? There are. You can contribute a maximum of $15,000 per financial year into the scheme. And the total amount you can save in the scheme across all years is $50,000. It’s also important to remember these contributions still count towards your overall annual super contribution caps. Right, so there are rules to the game. So I’ve been making these contributions, my deposit is looking healthy… what’s next? Do I just go sign a contract for a house? Absolutely not! And this is the most important step in the entire process. Before you even think about signing a contract to buy a property, you MUST apply to the ATO for an ‘FHSS determination’. A determination? What am I determining? My destiny? You’re determining how much you’re allowed to take out. The ATO calculates your eligible contributions and tells you the maximum amount you can release. If you sign a contract before you get this determination, you lock yourself out of the scheme completely. All that savvy tax saving is trapped in your super until you retire. Ouch! So, determination first, house hunting second. Got it. Now, I’ve seen some new rules about this. What if I get my determination, then find the perfect place and have to sign the contract that weekend? That’s a great question, as the rules have recently changed. You can now make a release request *after* signing a contract, but only for a limited time. If your determination was made on or after the 15th of September 2024, you have 90 days from signing the contract to request the release. But if your determination was made before that date, you only have a very tight 14-day window. Okay, let’s talk about the fun part. The payday! How do I get my money out? When you’re ready, you apply to the ATO for a release. They authorise your super fund to send the money to them, and then the ATO sends it to your bank account. The amount you get back includes your eligible contributions, plus a deemed amount of earnings. This earnings rate is calculated by the ATO; it’s not your super fund’s actual investment return. Okay, but the government is involved, so I’m guessing they tax it on the way out? They do, but this is the second part of the hack. The ATO will withhold some tax, but the amount you withdraw is taxed at your marginal tax rate, MINUS a 30% tax offset. A 30% discount coupon on the tax bill! So you get a 15% saving on the way in, and a 30% discount on the way out. This seems too good to be true. What’s the catch? There’s no catch, it’s just the design of the scheme. It’s often called the ‘Net 15% Benefit’. The benefit comes from that difference: the 15% tax on contributions versus the 30% offset when you withdraw. All up, if you contribute the full $50,000 to the scheme, the total tax benefit you gain is $7,500. That’s a $7,500 boost to your deposit, just from being clever with your tax. That is a massive help. A free $7,500 from the taxman is not something you hear about every day. It seems like a no-brainer, but it also sounds like there are a few tricky steps where you could really trip up. That’s the key takeaway. The scheme is brilliant, but the process is rigid. You need to make the right type of contributions, you must get the determination at the right time, and you need to understand the new release rules. It's a classic case of the government giving a benefit, but making you jump through the right hoops to get it. This is exactly where we help our clients. At Aevum Accounting, we guide first-home buyers through this entire process. We help you structure the contributions, ensure the paperwork like the 'notice of intent to claim' is done correctly, and plan the timing of the determination and release. We’re here to make sure you get the maximum benefit from the scheme without any costly mistakes. So you can get the government savings hack, without the administrative headache! A perfect partnership. And that brings us to the end of another episode! We hope today's discussion has provided you with valuable insights and helps you navigate your financial world with greater confidence. Before we go, a quick but important reminder: The information and strategies shared on this podcast are for general informational purposes only and do not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws are complex and constantly evolving. For personalized advice tailored to your specific individual or business needs, we always recommend consulting with a qualified professional