Accelerating your deposit for your first home
The First Home Super Saver Scheme (FHSSS) is a scheme passed into legislation that allows eligible Australians to accelerate their savings toward a first home deposit. It can mean first home buyers own their first home faster than if they were to save using a simple deposit account to save.
- Money can be saved from your pre-tax pay, attracting concessional tax treatment inside super, which is more tax-effective than saving in a deposit account outside of super. This means less money is paid in tax for saving money inside super than the same amount of money outside super.
- Money contributed into your super under the FHSSS is deemed to grow at a pre-determined rate, currently just under 5% p.a. (dependent on shortfall interest charge), regardless of the real performance of your super.
- This means that so long as your superannuation account has the available funds, your deposited monies are deemed to grow at a higher rate of return than what is currently available for savings accounts, with term deposits returning less than 3% p.a.
- The effect of the FHSSS can be seen in the below graph, using a simple example.
- The below shows a hypothetical scenario of an individual earning $50,000 p.a., saving $2,000 of pre-tax money into their super under the FHSSS, compared to saving the same amount of money in after-tax pay into a standard deposit account outside of super.
Even on the relatively small amount of savings of $2,000 per year, after 10 years, the same amount of money being saved yearly represents a difference in savings of $6,747. This effect is magnified further if more money is saved.
There has never been better tax treatment towards saving for a first home deposit than now. There are eligibility criteria and implementing the strategy correctly is important to avoid pitfalls. Speak to your financial adviser for an appropriate strategy to suit your needs.
Written by Cody MacKay, Financial Planner on behalf of Oak Financial Planning.
Cody has studied a Bachelor of Commerce majoring in Finance & Chinese Studies.
Currently, Cody is in the process of completing derivatives and margin lending accreditations and is planning on commencing his studies for his Masters of Financial Planning.
Cody is a passionate advocate for personal insurance and believes most people are unaware of personal risks that can be mitigated, that would otherwise be devastating
to their lives and more importantly to their loved ones.
 Australian Tax Office, (2018), Budget details graph [ONLINE]. Available at: https://budget.gov.au/estimator/ [Accessed 19 June 2018].
 Karolina Szczur, (2018), The Old Clare Hotel, Chippendale, Australia [ONLINE]. Available at: https://unsplash.com/photos/M-uhQRZRwlA [Accessed 10 September 2018].
Oak Financial Planning Pty Ltd ABN 78 126 751 335, trading as Oak Financial Planning is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licence and Australian Credit Licence 232706.
This blog article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
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