First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme (‘FHLDS’) was announced during the recent Federal election.

The new rules state that first time buyers need now only save a 5% deposit when they purchase a new property. Currently most banks and financiers require a 20% deposit before they will consider providing finance for the purchase of a residential property.

The FHLDS will guarantee loans through the National Housing Finance and Investment Corporation.

Not only will it mean that First Home Buyers do not have to save more for the deposit but they may avoid having to pay for mortgage insurance which is often thousands of dollars.

The new policy is due to come into effect from 1 January 2020.

To be eligible individuals cannot be earning more than $125,000 per year or for couples, more than $200,000 per year.

However the scheme is only available for the first 10,000 first home buyers.

FIRST HOME SUPER SAVER SCHEME

The FHSS (First Home Super Saver Scheme) scheme was introduced by the Australian Government in the Federal Budget 2017-18 to reduce pressure on housing affordability.

From 1 July 2017 you can make voluntary contributions into your superannuation fund to save for your first home.

After 1 July 2018 you can apply for the release of your voluntary contributions along with any earnings from the investments of the contribution from the investment of the contribution to go towards the purchase price of your first home.

To be eligible to make use of the scheme you need to live in the purchased property for at least 6 months within the first 12 months after settlement. It cannot be an investment property that you are going to rent out. If you plan to use the scheme then you need to apply for and receive confirmation before you sign a contract to buy. In addition it also needs to be your first home.

Once you receive consent to apply the scheme you can sign your contract and then apply for release of your FHSS amounts. However be careful because it may take between 15 and 25 business days to receive the funds. It is important that before you sign your contract that you have the confirmation and that you make sure that you have a lengthy settlement date if you require the FHSS funds to pay to the Seller on settlement.

You have 12 months from the date you make a valid request for release of your FHSS amounts, to do one of the following:

• sign a contract to purchase or construct your home – and give notice within 28 days that you have signed the contract
• recontribute the assessable FHSS amount (less tax withheld) into your super fund – and you must give notice within 12 months of the release request date that you have recontributed

If you don't give notice that you have done one of the above or you choose to keep the FHSS money, you will be subject to the FHSS tax. This is a flat tax equal to 20% of your assessable FHSS released amounts. This may not be the same as the total amount released.

Who is eligible

You can start making super contributions from any age. However, you must be 18 years old or older to request a determination or a release of amounts under the FHSS scheme.

Also, you must have:

• never owned property in Australia – this includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia (unless the Commissioner of Taxation determines that you have suffered a financial hardship)
• not previously requested the Commissioner to issue a FHSS release authority in relation to the scheme.

Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSS contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.

Financial Hardship Provision

You may still be eligible even if you have previously owned property in Australia, if we determine that you have suffered a financial hardship that resulted in a loss of ownership of all property interests. The types of events that could result in the loss of property interests include:

• bankruptcy
• divorce, separation from a de-facto partner, or a relationship breakdown
• loss of employment
• illness
• being affected by a natural disaster
• being eligible for early access to superannuation.

How to apply for financial hardship

If you want to be considered under the financial hardship provision you can apply by either:

visiting the ATO online using your myGov account linked to the ATO

Completing the First Home Super Saver scheme – hardship application form.