The Australian Government’s First Home Super Saver (FHSS) scheme helps first-time home buyers save for a deposit using their superannuation account. By making voluntary contributions to your super fund, you may be able to withdraw these savings, along with any earnings, to put towards purchasing your first home.
Why Use Super to Save?
- Tax Benefits: Super contributions are taxed at a lower rate (15%) compared to savings in a regular bank account, which may be taxed at your marginal tax rate (up to 47%). Also, depending on the type of contributions you make, these amounts may reduce your assessable income for the year and therefore reduce tax payable.
- Boost Your Savings: The tax advantages may allow you to save more money faster than traditional savings methods.
- Flexible contributions – You can adjust your contributions according to your financial situation and take advantage of employer bonus contributions if available.
- Joint applications – If you are purchasing a property with your partner, both of you can use the FHSS scheme to maximise your saving
Who Can Use the FHSS Scheme?
To be eligible, you must:
✔ Be at least 18 years old when applying to withdraw your savings.
✔ Have never owned property in Australia (exceptions apply for financial hardship cases).
✔ Make voluntary contributions to your super fund.
How Much Can You Save?
- You can contribute up to $15,000 per year (within super contribution caps please review and ensure you don’t exceed your concessional contribution cap currently $30k annually + any unused concessional contribution caps see more here).
- The maximum amount you can contribute under the scheme is $50,000.
What is the Tax on The Money Withdrawn?
Some of the amounts withdrawn from your super under the FHSSS are subject to tax (known as the assessable amount). This includes any concessional contributions that are released to you, plus any associated earnings that have accrued on any of the contributions released to you (either concessional or non-concessional).
The assessable amounts are taxed at your MTR less a 30% tax offset. The ATO will estimate your income for the year in which you withdraw the funds and will withhold tax from the amount paid to you at your estimated tax rate.
What is the Maximum release amount?
The FHSS maximum release amount is the sum of your eligible contributions, taking into account the yearly and total limits as listed above, as well as associated earnings. This amount includes:
- 100% of your eligible personal voluntary super contributions you haven’t claimed a tax deduction for (non-concessional contributions)
- 85% of your eligible salary sacrifice contributions (concessional contributions)
- 85% of eligible personal voluntary super contributions you’ve claimed a tax deduction for (concessional contributions)
- Deemed earnings associated with these contributions (this will be different from actual earnings in your super fund).
What is the deemed earnings rate applied by the ATO?
Associated earnings are calculated on these contributions using a deemed rate of return – this is based on the 90-day Bank Bill rate plus three percentage points.
This is similar to the ATO quoted SIC rates, as seen here.
Steps to Use the FHSS Scheme
- Check eligibility – before diving into the scheme, ensure you meet all the eligibility criteria outlined earlier.
- Determine Savings Goal – Assess how much you need to save for your first home purchase and how long it might take to reach that goal. This will help you plan your contributions accordingly.
- Make Voluntary Contributions to your super fund (e.g., salary sacrifice or personal contributions).
- Request an FHSS Determination from the ATO to determine how much you can withdraw.
- Apply to Withdraw Funds through the ATO before signing a contract.
- Buy or Build Your First Home within 12 months of receiving the funds.
- Live in the Property for at least 6 months within the first 12 months of ownership.
Example: Sarah’s Savings Plan
Sarah earns $70,000 annually and decides to contribute $10,000 annually to her super through salary sacrifice. Over five years, she saves $50,000, plus earnings.
- Tax Savings: Since concessional super contributions are taxed at 15% instead of her marginal tax rate (32% including Medicare levy), she saves $1,700 per year in tax, totalling $8,500 over five years.
- Withdrawable Amount: The FHSS scheme allows her to withdraw 85% of $50,000 plus earnings after tax adjustments, helping her significantly boost her deposit savings compared to a standard savings account.
Under FHSS
| Yr1 | Yr2 | Yr3 | Yr4 | Yr5 | Total | |
| Contribution to Super | $10,000 | $10,000 | $10,000 | $10,000 | $10,000 | $50,000 |
| Contribution Tax 15% | $1,500 | $1,500 | $1,500 | $1,500 | $1,500 | $7,500 |
| Net Contribution | $8,500 | $8,500 | $8,500 | $8,500 | $8,500 | $42,500 |
Assessable Amount by the ATO
| Contribution | $50,000 |
| ATO Deemed earnings 7.42% x $50,000 | $3,710 |
| Total Assessable Amount | $53,710 |
| Tax rate is MTR inc MCL less 30% tax offset = 2% | |
| Tax withheld | $1,074.20 |
Amount withdrawn
|
85% of Concessional Contribution |
$42,500 |
|
Add Earnings |
$3,710 |
|
Less Tax |
$1,074.20 |
|
Net |
$45,136 |
Not Under FHSS — Save in an interest-earning savings account.
| Yr1 | Yr2 | Yr3 | Yr4 | Yr5 | Total | |
| Before Tax Savings Amount | $10,000 | $10,000 | $10,000 | $10,000 | $10,000 | $50,000 |
| Tax 32% | $3,200 | $3,200 | $3,200 | $3,200 | $3,200 | $16,000 |
| Net Amount | $6,800 | $6,800 | $6,800 | $6,800 | $6,800 | $34,000 |
Assume earnings is Term Deposit Rate so as not to risk the funds, assume 4.5%
| Net Amount Invested | $34,000 |
| Interest on savings | $3,201 |
| Tax on interest | $1,024 |
| Net amount Saved for deposit | $36,177 |
As you can see, this is an increase of $8,959 to save towards Sarah’s first home.
Key Considerations
- Voluntary contributions do not include:
- Mandatory employer contributions (Super Guarantee).
- Spouse contributions.
- Government co-contributions.
- Contributions made for you by another person.
- Once contributed, you can’t access your super savings for other purposes unless they meet a condition of release.
- If you don’t buy a home within the required timeframe, you must either return the funds to super or pay additional tax.
- Getting financial advice is essential to determine if this scheme is right for you.
Assumptions:
Investment earnings within superannuation
The deemed rate of return is the “shortfall interest charge”, an interest rate used by the ATO. The shortfall interest charge is the 90-day Bank Accepted Bill rate published by the RBA plus 3%.
The deemed rate used in this calculator is currently 7.42%, which is the shortfall interest charge for January 2024 – March 2025. This is considered an after-tax return for FHSSS purposes; the calculator does not explicitly deduct tax on investment earnings. Rates of returns are assumed to be constant every year.
Gross investment return outside of superannuation
By default, the calculator assumes that Sarah will place her savings outside of superannuation, in an interest-bearing bank account that earns 4.50% pa. This default interest rate reflects the average retail term deposit rate in June 2024.
If the default earning return is changed, this may be intended to reflect a more aggressive investment strategy, such as investing in equities. This calculator does not consider any franking credits attached to dividend income or any discounts associated with capital gains. This should be considered before editing the default return outside of superannuation.
Conclusion
The FHSS scheme can be a great way to save for your first home, but you could face significant financial losses if you need to reinvest the funds back into super. Before withdrawing funds under the FHSS scheme, it’s crucial to have a solid home purchase plan within the required timeframe. If you’re unsure, you can consider requesting an extension to avoid reinvestment and the associated costs. For more information, please don’t hesitate to contact our super team.
