Guide to the First Home Super Saver Scheme

Are you a first home buyer intrigued by the Federal Government’s new First Home Super Saver Scheme? Well the good news is it’s designed to help Aussies like you achieve your homeownership dreams.

Whether you’re a young Aussie squirrelling away your money for a first home loan deposit or have simply spent too many years renting while paying off your landlord’s mortgage, we'll run you through how this new scheme can help you get a foot in the property door sooner rather than later...

First Home Super Saver Scheme

Saving for your first home is no easy task - not only do you have the home loan deposit to save up for but there’s also the cost of lenders mortgage insurance, stamp duty (unless you’re eligible for exemption in your state) and upfront mortgage fees.

So it’s easy to see why the Australian Government has attempted to fix housing affordability by introducing the First Home Super Saver Scheme. As a first home buyer you can:

• Opt in to the scheme with the Australian Taxation Office (ATO). Then you’ll have the ability to...
• Sacrifice up to $15k of your salary each year, which for instance your employer will then transfer into your super account on top of the 9.5% compulsory super contributions each time you get paid. Instead of being taxed at the marginal tax rate that usually applies to your salary, all funds saved through the scheme will only be taxed at 15%.
• Withdraw your savings once they’ve hit the $30k cap (which will get taxed 30% below the marginal tax rate that applies to your income bracket).

Sounds pretty good right? Let’s see if it’s really all it’s cracked up to be, by running through the positives and negatives below…

Pros

• Couples are eligible to participate, meaning they can make extra super contributions individually, then withdraw the funds later and roll them into the one home loan deposit.
• No new or separate account is required provided your super account is up and running as required by law for all Aussie workers (apart from sole traders or small business owners).
• You’ll save more than you would putting cash in a savings account. According to Treasurer Scott Morrison in his 2017 Federal Budget speech, most first home buyers who use the scheme will accelerate their savings by at least 30%. When we crunched the numbers, an Aussie on an $80k salary who makes an additional super contribution of $15k each year, would have a total of $25,603 after 2 years - making them $5,297 better off than if they had put that money in the best savings account at the time of writing at 3.05%.

Cons

• Depending on the type of property you’re looking to purchase and the area you live in, $30k probably won’t provide you with a large enough deposit to buy a home which means you’ll most likely need to boost it with additional savings. Once you withdraw the money you've saved through the Super Saver Scheme, you've got 12 months to sign up to buy or build a home, which means you'll likely have to be saving these extra funds at the same time. If you don't buy a home in that 12 months, you can put the savings back in your super account, apply for another 12 month extension or if you want to keep it in your savings account, you'll have to pay a tax of 20% of the assessable amount you saved through the FHSS.
• Taxpayers will cough up $250 million for the scheme over four years (with the ATO receiving $9.5 million on top of that figure to implement the scheme).

To find out more about the First Home Super Saver Scheme visit the ATO’s about page here and before you go read our top tips for getting your first home loan approved below. Also check if you're eligible for the First Home Owner Grant in your state or territory. Then read up on our top first home buyer tips below.

Tips for first home buyers

While taking the first step and saving for your home deposit (and other property buying costs) may be exciting, when you get there you still have to convince the banks that you’re worthy of a home loan. So make sure you:

1. Can show genuine savings. When you apply for a home loan the lender will want to see that you have 'genuine savings' by looking at least 3 months worth of your most recent bank statements. The benefit of a good savings history is it shows the bank that you’re more than capable of repaying the home loan.

2. Don’t job hop. Unless absolutely necessary, it’s a good idea to stay with your current employer, so you can show the lender you have a stable income and are not a risky borrower.

3. Check your credit score. It’s easy to receive a copy of your credit score these days, as there are several online credit reporting providers which allow you to access a copy of your credit report once a year for free. When you download your report, make sure you look out for any errors, and get them removed from your file before applying for a home loan.