Everything you need to know about the First Home Super Saver Scheme
Everything you need to know about the First Home Super Saver Scheme
This article was originally published on 8 August 2021 and updated on 13 August 2024.
The First Home Super Saver (FHSS) scheme is an Australian Government initiative designed to help first home buyers save for a deposit faster by leveraging the tax benefits of superannuation. However, there are specific eligibility criteria, tax implications, and contribution limits to consider if you're planning to use this scheme to enter the property market sooner.
How the FHSS scheme works
The Australian Government introduced the scheme to ease housing affordability pressures. It allows first home buyers to save for a deposit within their super fund, which benefits from concessional tax treatment. You can make voluntary contributions - either before-tax or after-tax - and withdraw these funds when you’re ready to purchase your first home.
Eligibility criteria
To be eligible for the FHSS scheme, you must:
- Be a first home buyer and at least 18 years old when requesting the release of funds
- Purchase or build a home in Australia
- Live in the property for at least six of the first 12 months from when it is practicable to occupy it
- Not have previously used the FHSS scheme.
Tax considerations
Taxed going in
If you contribute through a salary sacrifice arrangement or make tax-deductible super contributions, a 15 per cent contributions tax will apply. This tax rate is often lower than your standard marginal tax rate.
Taxed coming out
When you withdraw your FHSS amount, it will be subject to withholding tax at your marginal tax rate, reduced by a 30 per cent tax offset. The withdrawn amount and any associated earnings will be included in your tax return for the financial year you request the release.
Maximum release limits
You can withdraw:
- Up to $15,000 of eligible contributions from any one financial year
- A total of $50,000 across all years.
You will also receive an amount of earnings related to those contributions, calculated by the ATO.
These limits apply per person, so if you’re buying with a partner who also uses the FHSS scheme, you could withdraw up to $100,000 combined across all years.
Note that contributions must be voluntary - employer contributions (Superannuation Guarantee) do not count towards your FHSS savings.
Determining your available amount
Before signing a contract for your first home, you must apply for an FHSS determination through myGov. This will confirm the amount you can withdraw, and the determination is provided instantly. You can apply for a determination multiple times without triggering a withdrawal until you're ready.
Applying for a release of funds
You can request the release of your FHSS amount once you’re ready to start your home-buying process - you don’t have to wait until you sign a contract. Ensure you have a determination from the ATO before proceeding.
If you’ve signed a contract, you must request the release within 14 days. Processing your request can take 15 to 25 business days.
After requesting the release, you have 12 months to enter into a contract to purchase or construct a home. This may be extended for a further 12 months if needed. You can only request a release once under the FHSS scheme, so plan carefully.
Notifying the ATO once a contract is signed
Once you’ve signed a contract, you must notify the ATO via myGov within 28 days, in addition to requesting the release of funds.
Changes to the FHSS scheme
The Australian Government announced upcoming changes to the scheme, aimed at improving its operation, effective from 15 September 2024. These changes include:
- Extended timeline: The time to apply for a FHSS determination will be extended from the date of contract signing to the date of property settlement, giving participants more flexibility.
- Longer Request Period: The period to request a release of funds after entering into a property contract will be increased from 14 days to 90 days.
- Amendment Options: Participants will have the ability to amend their request before receiving the FHSS scheme amount, allowing for corrections or adjustments.
- Withdrawal Flexibility: Individuals can withdraw from the scheme without forfeiting the ability to reapply in the future, providing more freedom and reduced pressure on first-time buyers.
- Returned Funds: If FHSS amounts are returned to the super fund before being released, they will not count towards the individual's contribution cap.
Key considerations
- Evaluate whether saving for a home deposit through your super is the best option for your circumstances
- Confirm with your employer if they offer salary sacrifice arrangements
- Check with your super fund to ensure they can release the funds and whether extra charges will apply
- Verify your eligibility for the scheme
- Consider the limits, timing and availability of funds relative to your home-buying timeline.
Want to learn more?
You can learn more about the FHSS scheme at ato.gov.au. If you would like assistance with arranging finance for your property, contact a member of our Finance Solutions team. If you would like tailored advice for your personal tax and superannuation strategies, contact a member of our Private Wealth team.
Marie Ryan is an accredited finance broker and authorised credit representative 519653 of BDO Corporate Finance Ltd (ACN 010 185 725) Australian Credit Licence 24551. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.
The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.