New ATO guidance on the First Home Super Saver Scheme: Guidance note GN 2018/1

On 1 November 2018, the ATO published the FHSS Scheme guidance note, GN 2018/1 (Guidance Note), which aims to provide further assistance for individuals, funds and intermediaries. The ATO also released the FHSS Scheme Law Companion Ruling, LCR 2018/5 (Law Companion Ruling) on 15 August 2018.  This article will discuss the Guidance Note.

 

The key elements of the FHSS Scheme

In our previous ClearLaw article on this topic, we introduced the key elements of the FHSS Scheme.  In essence, the FHSS Scheme allows eligible first home buyers to:

  • save for a house deposit by taking advantage of the concessional tax treatment within super;
  • access voluntary concessional and non-concessional contributions; and
  • request an FHSS determination from the ATO to release voluntary contributions and earnings.

Key issues covered by the Guidance Note

Eligibility to access the FHSS Scheme

The Guidance Note provides further details on the FHSS Scheme eligibility requirements, including:

  • what it means to have never held an interest in real property, as the FHSS Scheme is only available to persons who have never held such an interest;
  • how financial hardship may impact a person’s eligibility under the FHSS Scheme; and
  • the implications of being a trustee or beneficiary of a trust, including being a member of a fund, that holds real property.

Eligible contributions

The Guidance Note confirms the kinds of contributions that are eligible for release under the FHSS Scheme, as well as those that are not eligible. Importantly, eligible contributions include:

  • voluntary concessional contributions: including salary sacrifice amounts or contributions for which a tax deduction has been claimed, which are taxed at 15% in the fund; and
  • voluntary non-concessional contributions: including personal after tax contributions where a tax deduction has not been claimed.

Eligible voluntary concessional and non-concessional contributions made into a super fund from 1 July 2017 may be eligible to be accessed under the FHSS Scheme.

Applying for a FHSS determination for the release of funds

From 1 July 2018, individuals can apply to the ATO for a FHSS determination, for the release of eligible funds, up to the maximum amount (known as the FHSS maximum release amount).  There is a limit of $15,000 of eligible contributions per financial year that may be counted towards the FHSS maximum release amount, and a total limit of $30,000 of eligible contributions across all years. Concessional and non-concessional contributions which exceed the concessional contributions cap or non-concessional contributions cap, as applicable, are not counted for the purposes of releasing funds under the FHSS Scheme.

The Guidance Note also sets outs the specifics of how the FHSS maximum release amount is calculated, which involves considering:

  • eligible non-concessional contributions;
  • 85% of eligible concessional contributions, and
  • associated earnings for these contributions.

The Guidance Note also discusses the concept of the ATO’s “order rules” which are used to determine which eligible contributions are counted when calculating the FHSS maximum release amount.

Using released amounts to purchase or construct a home

Following an FHSS determination and the release of funds by the ATO, the funds may be used to purchase or construct a house. A person has up to 12 months from the time the first amount is released by the ATO to sign a contract to purchase or construct a home. Amongst other things:

  • the home must be a residential premises (i.e. not a houseboat, motor home or vacant land);
  • the individual must genuinely intend to occupy the home, and intend to occupy it for at least 6 of the first 12 months if practicable;
  • the purchase or construction price must be at least equal to the released amount;
  • the individual must notify the ATO within 28 days of entering into the relevant contract; and
  • if vacant land is purchased after seeking the FHSS determination, the person must still enter into a contract to construct a home within the relevant 12 month timeframe.

If the individual does not enter into a contract to purchase or construct a home within the 12 month timeframe, the following options are available:

  • apply for an extension up to a maximum of a further 12 months;
  • recontribute an amount into the super fund (subject to further conditions); or
  • pay an FHSS tax, calculated at 20% of the released amounts that were counted towards the individual’s assessable income.

Does your SMSF trust deed allow the release of funds for the FHSS Scheme?

The FHSS Scheme has implications for people with an SMSF who are considering accessing the FHSS Scheme. Individuals holding funds in an SMSF should ensure their trust deed is drafted in a way that allows trustees to release funds to members as anticipated by the FHSS Scheme. If the SMSF does not – then individuals should consider updating or amending their deed.

The Cleardocs SMSF Trust Deed has been drafted broadly enough that it permits trustees to release funds to members for the purposes of the FHSS Scheme.

Individuals with an SMSF are also well advised to ensure their investment strategy supports the application of funds in order to obtain the benefits under the FHSS Scheme. To provide greater certainty that the trustee is complying with its duties, an investment strategy for your SMSF will assist the SMSF trustee to remain compliant with any investment strategy and superannuation law.

The Cleardocs SMSF Investment Strategy is also available to assist individuals in these matters.

Individuals should also ensure they are, or the trustee of their SMSF is, keeping adequate records in respect of voluntary contributions being made to the fund.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

 You can read earlier ClearLaw articles on a range of topics, such as:

Order related document packages