How the First Home Super Saver Scheme could help you get into your first home sooner

The First Home Super Saver Scheme (FHSSS) was launched in the May 2017 Federal Budget to help Australians boost their savings for a first home by allowing them to build a deposit inside superannuation, giving them a tax cut.

Updated 20 July 2021

Federal Budget 2021-22 Update: On 11 May 2021, as part of the 2021–22 Federal Budget, the Australian Government announced it will improve the operation of the First Home Super Saver (FHSS) scheme and increase the maximum releasable amount up to $50,000. These measures are not yet law.1

How does it work?

  • Under its housing affordability package, the Federal Government announced in the 2017-18 Budget. that first home buyers will be allowed to salary sacrifice a portion of their pre-tax income into their superannuation to save a property deposit.

    From 1 July 2022, eligible individuals will be able to release up to $50,000 (currently $30,000), with maximum contributions of $15,000 per financial year, under the scheme to assist with the purchase of their first home. Voluntary contributions made from 1 July 2017 can count towards the total amount released.2

  • Salary sacrifice contributions will be taxed at the regular superannuation rate of 15% - which is likely to be below a first home buyer's marginal tax rate.

  • In addition, first home buyers will receive a tax discount when it comes time to withdraw the saved funds in order to buy a home. As part of the federal Government's plan, the monetary withdrawal will be taxed at the first time buyer's marginal tax rates less a 30% offset.

  • Those who are self-employed or whose employer does not salary sacrifice can claim a tax deduction on personal contributions.

  • Voluntary contributions must be made within current superannuation caps.

  • As such, the total contributions a person can make from both compulsory employer contributions and voluntary contributions cannot exceed $15,000 this financial year.

  • For anyone looking to buy their first home with a significant other, two people are allowed to salary sacrifice into the same superannuation account and withdraw the funds when needed.

So how will the First Home Buyer Super Saver Scheme work in practice and is it really worth all the fuss?

As an example, let's assume a couple are looking to buy their first home together and they are earning $70,000 each per year.

Using the Federal Government's First Home Super Saver Scheme Estimator, if both parties salary sacrifice $15,000 a year into the same superannuation account, they should be able to save approximately $50,710 in two years.

At the end of the day, the couple would come out approximately $11,6043 better off than if they had both contributed $15,000 a year to the one savings account with a standard interest rate.

How does the scheme benefit first home buyers?

Due to the favourable tax treatment, generally available through super, the FHSSS intends to help first home buyers to grow their deposit more quickly, while potentially reducing the tax they pay.

The scheme will be administered by the Australian Taxation Office (ATO), which will receive an additional funding of $9.4 million to implement it.

The ATO will also be responsible for ensuring that fund members are first home buyers and that the funds withdrawn will be used to buy a home.

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Who is eligible?4

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 an 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.

How can I save in super?5

You can start saving by entering into a salary sacrifice arrangement with your employer to make voluntary contributions or by making voluntary personal super contributions.

You can contribute into any super fund(s) although contributions made to a defined benefit interest or a constitutionally protected fund will not be eligible to be released under the FHSS scheme.

Note: Some employers may not offer salary sacrifice arrangements to their employees.

Before you start saving you should:

  • check that your nominated super fund(s) will release the money
  • ask your fund about any fees, charges and insurance implications that may apply
  • check that your super fund has your current contact details – ensure your name matches what we have
  • be aware that if you receive FHSS amounts, it will affect your tax for the year in which you make the request to release. You will receive a payment summary and you will need to include both the assessable and tax-withheld amounts in your tax return.

For more information about the financial hardship provision you should speak to the ATO to determine if the financial hardship provision applies to you before you start saving. And, for more information about the type of contributions that are eligible and how to manage them speak to to the ATO or visit https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/ for more information.

How do I withdraw contributions under FHSS?6

To make a withdrawal under the scheme, an application to the Australian Taxation Office (ATO) will be required. To be eligible to have the funds released as part of the FHSS you will need to meet the following requirements: 

  • Never owned any property in Australia, including an investment property, vacant land, commercial property, a lease of land or a company title interest in land in Australia, and 
  • You are only allowed one FHSS withdrawal in your lifetime. 

It is important to understand that eligible contributions into your super for the FHSS include: 

  • Voluntary concessional contributions, such as salary sacrifice or contributions where a tax deduction has been claimed (usually taxed at 15% in your fund), and
  • Voluntary non-concessional contributions that you have made. This type of contribution is made after tax or if a tax deduction hasn’t been claimed. 

While the above are eligible contributions that can be withdrawn, there are super contributions which will not qualify and cannot be withdrawn under the scheme, such as Superannuation Guarantee contributions (which are those made by your employer), as well as spouse contributions (which are those that your partner may choose to put into your super fund). 

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1 https://www.ato.gov.au/General/New-legislation/In-detail/Super/First-Home-Super-Saver-Scheme---increasing-the-maximum-releasable-amount-to-$50,000-and-technical-amendments/
2 https://www.ato.gov.au/General/New-legislation/In-detail/Super/First-Home-Super-Saver-Scheme---increasing-the-maximum-releasable-amount-to-$50,000-and-technical-amendments/
3 https://www.csc.gov.au/assets/fhsss-calculator/index.html#/calculator/table
4 https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/
5 https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/
6 https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/