The Australian government’s First Home Super Saver (FHSS) Scheme has unexpectedly achieved success, according to figures released by the tax office.
Despite the scheme requiring applicants to fulfill a list of criteria set by the Morrison government, more than 43,000 Australians have applied for the scheme to receive tax concessions to purchase their first home.
The ALP had previously planned to scrap the scheme when only 2000 applicants had signed up. However, the last available figures for the 2022 financial year showed 12,460 people had requested a release under the scheme, which resulted in a total of $167m being distributed.
In an attempt to make the FHSS scheme more attractive to future applicants, Peter Dutton included it as part of the Coalition’s housing policy in his budget reply speech in May. Despite this, the ALP has instead proposed against utilising superannuation funds to fund housing, with Financial Services Minister Stephen Jones claiming it is a policy of the “emperor who does not believe in superannuation”.
According to Stuart Wemyss of ProSolution Private Clients, the scheme is attractive to individuals looking to fund their home deposit due to its tax advantages and ability to instill financial discipline in savers. It allows a first-home buyer to transfer up to $50,000 of their own savings held in super to purchase a home, with a minimum annual contribution amount of $15,000 and a maximum voluntary pre-tax contribution of $27,500, minus the superannuation guarantee charge on salary.
Furthermore, any money held in the scheme is not exposed to market volatility, instead accumulating return through a government deemed rate of the 90-day bill rate plus 3 per cent. Recent changes have been made to the scheme to make it more accessible to potential applicants. The ATO has noted that some applicants may fail to meet the scheme’s criteria for unforseen reasons, however amendments made to the scheme have increased the applicants’ ability to change their application after it has been made.
Furthermore, the time individuals have to request a release after entering into a contract to buy a home has also lengthened to 90 days. The FHSS has achieved success despite its restrictions. It remains to be seen whether it will become a more popular option due to the recently made amendments, or whether the conflict between the ALP and Coalition’s positions on the scheme will cause it to dwindle in use.
