Saving a house deposit is widely regarded as being the hardest part of purchasing a first home, which is why the government brought in the First Home Super Saver Scheme in 2017. Under the scheme, first home buyers who had made voluntary contributions to their super were able to draw back on these amounts to the sum of $30,000 across two years. This meant that couples who had made contributions and chose to access their super under this scheme could effectively have a deposit of $60,000 between them.
In 2020, as a way of helping people who were experiencing financial hardship as a result of COVID-19, the federal government announced that eligible Australian citizens and permanent residents would be able to access up to $20,000 of their superannuation – whether the contributions had been made by themselves or their employer – across FY20 and 21.
The eligibility criteria is broad but generally only applies to those who have lost their jobs, been stood down or were sole traders who had seen a decline in turnover since 1 January 2020.
With two options for accessing superannuation before retirement, what is there to know about using it as a house deposit?
Super Early Release Scheme v First Home Super Saver Scheme
There are several differences between the two schemes, with the most important being:
- The total amount that can be drawn ($20,000 vs $30,000);
- The type of super contributions that can be drawn against (any vs voluntary only); and
- The timeline for accessing the funds (once in FY20 and once in FY21 vs any time).
You’ve accessed your superannuation. Now what?
Your house deposit will be looking a lot healthier thanks to the boost that your superannuation has given it. So, what should you do next? If you have accessed your super as part of the First Home Super Saver Scheme, you should have already commenced your home loan application. You have up to 12 months from the release of your superannuation to purchase your home.
If you have accessed your super through the Super Early Release Scheme you are free to do with these funds what you wish. However, it is also worth considering that accessing your super via the Super Early Release Scheme is based on eligibility criteria related to loss of job or income; factors that may impede your ability to secure a home loan.
If you are in the position to purchase a home and you want to put the cash towards your deposit then this is completely acceptable. If you have recently seen a decline in your income or you have lost your job, you can also keep the money in a savings account for when you are ready to commence your property search again.
However, if you have accessed or plan to access your superannuation solely for the purpose of enhancing your house deposit, you should be mindful of the eligibility criteria and ensure you meet it.
I used the Super Early Release Scheme to access my superannuation but I am not certain I was actually eligible
If you made a claim to access your superannuation through the ATO’s Super Early Release Scheme but you were, in fact, not eligible to do so, you should seek advice from a tax specialist immediately.
The ATO has recently announced a new program that will see a number of Australians who accessed their super being audited to determine who was actually eligible and who wasn’t. Penalties for accessing super through the early release scheme include a fine of $12,600 per transaction (i.e. a $25,200 fine for a $20,000 withdrawal) as well as having to declare the superannuation as income and therefore having to pay tax on it.