The maximum value for participants in the First Home Super Saver Scheme (FHSSS) will generally arise from making voluntary concessional contributions (CCs) to their super fund. A large part of the benefit stems from the tax differential between personal marginal tax rates that would otherwise apply and the tax applied to CCs, which in the FHSSS includes both superannuation contributions tax and personal income tax (less a 30% tax offset) paid on withdrawal.
The natural assumption is that those subject to the higher personal marginal tax rates will benefit most from this tax rate differential. However, employees with high levels of employment income will generally have a higher level of Superannuation Guarantee (SG) contributions paid by their employer, reducing their ability to make voluntary concessional contributions (up to the $25,000 CC cap) that may be subsequently withdrawn for a first home deposit.
This article provides guidance for financial services professionals on the effectiveness of the FHSSS for clients with varying levels of employment income, and the number of years needed to maximise the FHSSS benefit.
Refer to our earlier article 'Super savings accessible for first home buyers' for information about the general operation of the FHSSS.
FHSSS contribution limitations
Contributions eligible for withdrawal from super under the FHSSS are limited to $15,000 per income year, and $30,000 in total. So clients who wish to maximise the benefit they receive from the FHSSS should plan their CCs over at least two income years. Some clients, however, will need to plan over a longer period.
Only voluntary contributions are eligible for withdrawal. SG contributions made by a client's employer reduce that client's capacity to make voluntary CCs up to the CC cap. The following table shows the amount of eligible CCs per annum a client can make based on their employment income level, and also shows an indication of the number of years (rounded up) they'll need to maximise the FHSSS benefit.