My take on the FHSS

"The thing that appealed to me the most about the FHSS Scheme was that I was able to reduce my taxes and save for my first home, which ultimately could help me save for a home faster. We had a scheme similar to this in Canada, so I was somewhat familiar with the idea of saving within a retirement fund. Since I was diligent about investing and saving, the FHSS seemed like a no-brainer for me.

"Because I was already saving outside of my super for the deposit and stamp duty of my first home, I felt comfortable contributing to my super with the intention of using that money for my downpayment."

How I set it up

"I reached out to my employer and set up a salary sacrifice plan contributing a certain percentage of my income to super. When I had a large amount of money saved outside of my super for my first home, I requested that 100% of my pay be salary sacrificed. This way, I could optimise the amount and time my money is invested into super. Now, I understand that this is pretty extreme, and not possible for most people, but it was something I did at the time. (Also keep in mind that at the time the contribution limit was 30k, whereas it’s $50k now.)"

The challenges

"The biggest challenge of the FHSS was that it was hard to track my contributions. Because the percentage that is taken out from concessional vs non-concessional contributions varies, I had to track everything in a spreadsheet. I needed to track what amount I contributed (and how), what percentage would be released (in order to optimise the contribution to the scheme), and what the investment yield would be. The benefit of this scheme also varies based on what income bracket you’re in. This is because there may be other tax considerations (such as the Division 293 Tax ).

"As is the case with most financial schemes and products, there was also so much jargon to wrap my head around (which is the case with super anyways!). Plus, I somehow missed the comment about the money needing to be released before I signed a contract to purchase a home.

"Since I was simultaneously saving and investing in the FHSS as I was searching for a home, I didn’t want the money released until I was sure I was purchasing a house. That's why I didn’t request a FHSS determination from the ATO prior to purchase.

"In fact, I signed the contract to purchase my first home, and in a panic, I had to contact the real estate agent to see if we could date the contract for the next day. My aim in doing so was to request a FHSS determination from the ATO, and then sign the contract.

"Now, this may not be an issue for some people. For me, though, it definitely added additional stress and panic during the chaos of putting in an offer and signing papers."

The financials breakdown

"For some time, I'd been saving for a property in different ways. I saved 65% in cash; most of that was cash in a savings account, while another portion of that was equity pulled out of my Canadian property. (Coincidentally, I also purchased using my Canadian home using the Canadian version of the FHSS scheme). 20% of my property savings were in investments, and the remaining 15% was saved using the First Home Super Saver.

"My partner and I saved this downpayment together, although I was the only one who leveraged the FHSS to purchase our first property."

The benefit of the FHSS

"Super is one of Australia’s most tax-effective investing strategy. Combine that with the other benefits of the FHSS and it can be an effective tool for building a home deposit and saving for retirement.

"Since most calculations for a comfortable retirement include a paid off house, it makes sense for most Australians to consider how property fits into their plan. Buying a property was also a part of my own financial plan, so it made total sense that this was something I wanted to consider."

What would I do differently?

"There’s not much I’d do differently, but I do wish I knew about the FHSS earlier. If I had, I could have contributed to super earlier, thereby allowing for compounding to do its thing. Plus, it wouldn’t have been such a scramble to invest into the FHSS. In the end, it therefore hopefully wouldn’t have been as stressful when I eventually decided to withdraw the money.

"The other thing is: had I known about this earlier, I may have potentially encouraged my partner to consider the FHSS as well. That way, we both would have been able to benefit from it."

Final notes

"The First Home Super Saver Scheme was a great way to save for a first home, and to go through the motions. But it was a bit of a challenge to fully run the numbers, track, and stressful to get the money out.

"Do I think it’s a good scheme? If a first home is a part of your wealth-building plan, then absolutely."

Case study information

Ana heard about the FHSS through while researching investing. She decided that it may be worth contributing to her super to reduce her taxes and access her contributions for her first home.

At the time, the voluntary contribution cap for the FHSS was less, not $50k as it is now.

What she did:

2021

• She invested a percentage of her income into super each month, ensuring she hit the cap for FHSS contribution
• As she started investing in February of the year, she only had five months to contribute to her FHSS contribution
• She already had a large portion of the downpayment / stamp duty saved outside of super/FHSS
• Therefore, started investing 100% of her income (was living off the savings in the meantime)

2022

• She invested 100% of her income for the first her months of the new financial year, ensuring she would max-out her contributions.
• Once she reached her contributions, she felt confident that she could sign a contract her first home
• She then requested the money to be released
• She received the money
• Then, to release the money, she needed to follow up with the ATO about whether she entered a contract to purchase a home.
  

Some things worth mentioning

• Although there was information online about the FHSS, it wasn’t easy to understand:
  • How much was already contributed to the FHSS
  • How much additional money could be contributed to the FHSS
  • If the contribution cap was reached for the year (it needed to be tracked separately in a spreadsheet)
  • What the return / yield of the investments of the FHSS were (and how much would be released at a given time)
• She also needed to request a FHSS determination from the ATO prior to signing a contract, but was still contributing up until she found a house. She therefore didn’t want to withdraw until she was certain that a house was to be purchased.
• Because Ana was still contributing to the FHSS as she was looking to purchase her first home, she preemptively signed the contact for her new home. Then, she needed to ask the sellers to cancel the contract and issue a new one for the next date. At the time, was was the only way that she could ‘release’ the money from the FHSS.