First home buyers told to tread carefully with Super Saver Scheme
First home buyers have been told to approach the First Home Super Saver Scheme with caution, given that released amounts must be used for a property purchase within a 12-month time frame.
Speaking to SMSF Adviser, Cooper Grace Ward partner Scott Hay-Bartlem said with the ATO able to release contributions for the First Home Super Saver Scheme (FHSSS) from 1 July 2018, first home buyers should be careful to tick all the boxes and ensure they have a good understanding of it.
Mr Hay-Bartlem said it’s important that first home buyers keep track of what contributions they’ve made and might be able to withdraw because it isn’t a separate cap.
He also noted that any released amounts will be taxed at their marginal rate less 30 per cent offset.
“I don’t think a lot of first home buyers will realise that till they’re actually doing it that they’ve got that tax coming out,” he said.
“Of course if you don’t actually enter into a contract to purchase a property within 12 months, then you have to actually pay tax on the amount you had withdrawn and you can’t automatically put it back into super.”
The ATO explains on its website that while home buyers can apply for an extension of time to use the released amount for a property purchase, this extension is limited to further 12 months.
Super members who don’t use the released amounts for the purchase of a home also have the option of recontributing the amount back into their super fund, less any tax withheld by the ATO.
They can also keep the released amount, which will be subject to a flat tax equal to 20 per cent of their assessable FHSSS released amounts, the ATO said.
Mr Hay-Bartlem said first home buyers will therefore need to be very certain that they’re actually going to progress to buying their first home before accessing the money for it.
“You’ve also got to write to the ATO to get the determination for the super fund. So you’re going to have to allow enough time to physically get the money, but not too much time in case you can’t find something, and I know people that have looked for more than a year to find something,” he said.
“I’m not sure how attractive people will ultimately find it.”
It’s also not entirely clear, he said, how the banks will treat these amounts when assessing someone for a loan.
“Before making contributions, people may want to check how the bank will treat it in a practical sense,” he advised.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.