January 19, 2024

Navigating the First Home Super Saver Scheme: A pathway to your first home in Sydney

The dream of owning a home in beautiful Sydney, with its vibrant lifestyle, strong employment opportunities and nice weather, is a goal for many young Australians. However, living our great city doesn’t come cheap! Here we share how the First Home Super Saver Scheme (FHSSS) could be your key to entering the Sydney property market.

It’s harder than ever to buy a home in Sydney. Despite rising interest rates, Sydney dwelling values have increased by 9% to a median value of $1,121,196 in the 12 months leading up to 31 October 2023 (according to data from CoreLogic). A prospective buyer would need to pay a 20% deposit, plus cover stamp duty costs and other purchasing costs, to avoid paying Lenders Mortgage Insurance (LMI) and obtain a competitive home loan.

In this scenario, a purchaser would need to pay roughly $280,000 upfront. Not many young people have this kind of cash saved up, so if you’re keen to enter the property market – it’s important to plan ahead. You can also take advantage of government initiatives designed to help first-timers crack the property market. One scheme with growing popularity is the Australian Government’s First Home Super Saver Scheme (FHSSS), but it can be tricky to understand.  So here’s a summary of how the FHSSS may help you (or your children) save for your first home.  

Understanding the First Home Super Saver Scheme (FHSSS)

The FHSSS, introduced by the Australian Government, allows eligible individuals to save for their first home inside their superannuation fund. Here's how it works:

1. Voluntary contributions: You can make voluntary contributions to your superannuation, up to a maximum of $15,000 per financial year, and a total of $50,000 under the scheme.

2. Tax advantages: Contributions and investment earnings are both taxed at just 15%, which is lower than most Australians’ personal income tax rate.

3. Invest: Most super funds offer a wide variety of investment options to invest your savings (rather than investing in a savings account that doesn’t keep up with the property market).  

4. Withdrawal for home deposit: When you're ready to buy, you can apply to withdraw these contributions (along with associated earnings) to put towards your first home deposit.

5. Combine and conquer: Have a partner who is also an eligible first home buyer? You can both use the scheme and contribute up to $50,000 each!

Why early planning is crucial

1. Time to save: Given the size of the deposits required in Sydney, starting to save early is essential. The FHSSS can help accumulate these savings more tax-effectively through the superannuation system.

2. Compound earnings: The tax savings and investment earnings will grow over time.

3. Reduced hurdles: When you’re ready to enter the property market, you can apply for a release of the FHSSS and combine it with your non-super savings and other first home buyer benefits for a much smoother process of buying your first home.

Is the FHSSS right for you?

There are plenty of things to consider when weighing up whether the FHSSS is right for you. You might also have questions about which super fund you should use, how much you should contribute and which investment options you should select. If you’ve never owned a home before and have home ownership as a future goal, our expert advisers can work with you to formulate a tailored savings plan to help you build your future home deposit. Give us a call on (02) 9739 6555 to get started on your journey to home ownership today.

Please note, the above information does not constitute financial advice and does not take into account your current circumstances or goals. Please speak with a financial adviser before acting on any information found here or throughout the 5 Financial website.

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