Saving for a first home deposit can feel like the hardest part of getting into the property market. But there’s a government scheme that many first home buyers still don’t fully understand, and it could help you build your deposit differently.
It’s called the First Home Super Saver Scheme, or FHSSS.
So, how does it work?
The scheme allows eligible first home buyers to make voluntary contributions into their super and later apply to withdraw eligible amounts, along with associated earnings, to help purchase their first home.
This doesn’t mean you can simply withdraw the super your employer has been paying throughout your working life. The scheme applies to eligible voluntary contributions you make into super, such as salary sacrifice contributions or personal voluntary contributions.
Under the current rules, up to $15,000 of voluntary contributions per financial year can count towards the scheme, up to a maximum of $50,000 across all years.
Why would you save through super?
For some people, the potential benefit comes down to tax.
Salary sacrifice and other eligible concessional contributions are generally taxed at 15% when they enter your super fund, which may be lower than the tax you would otherwise pay on that income if paid into a bank account.
When you’re ready to buy, you can apply to release eligible contributions and associated earnings. Generally, you can access 85% of eligible concessional contributions and 100% of eligible non-concessional contributions, subject to the scheme’s limits.
It won’t be the right strategy for everyone, but for some first home buyers it can be another way to build towards a deposit.
What could this look like?
For example, if you earn $100,000 a year and put $15,000 of your pre-tax income towards your first home savings, salary sacrificing that amount into super would generally leave $12,750 after the 15% contributions tax.
If that same $15,000 was paid to you as salary and you saved it in a bank account, you would have approximately $10,200 left after income tax and the Medicare levy.
That’s a difference of around $2,550 in this simplified example.
What if you use the full $50,000 FHSSS limit?
If you eventually make the full $50,000 of eligible concessional contributions, 85% is releasable under the FHSSS, meaning $42,500 of those contributions can be released, plus associated earnings calculated by the ATO.
By comparison, if the same $50,000 of gross income was taxed at an assumed 30% marginal rate plus the 2% Medicare levy before being saved in a bank account, approximately $34,000 would be left to save before considering any interest earned.
So, on those simplified assumptions, that’s $42,500 through FHSSS versus $34,000 through a bank account, before associated earnings, bank interest and the tax that applies when the FHSS amount is released.
This is a simplified example only. Individual tax circumstances vary, and FHSSS contribution limits, release rules and tax on withdrawal apply.
The potential benefit can also depend on your income. Generally, the higher your marginal tax rate is above the 15% super contributions tax rate, the greater the potential tax advantage of using the FHSSS.
There are rules you need to know
This is one of those schemes where understanding the process before you start is important.
Generally, you need to be at least 18 years old when requesting a FHSSS determination or release and must not have previously owned property in Australia, although there is an exception for some people who have experienced financial hardship.
You also need to genuinely intend to live in the property you’re purchasing.
Before accessing the funds, you’ll need to request an FHSSS determination through the ATO.
There are also some key timing rules to be aware of. If your FHSSS determination was made on or after 15 September 2024, you can sign a contract to purchase or build your home up to 90 days before requesting the release of your FHSSS amount. If you request the release before finding a property, you generally have 12 months from the date of your valid release request to sign a contract, with the ATO able to allow up to a further 12 months.
Once you sign a contract, you also need to notify the ATO within 90 days of the contract date. This can be done through your linked ATO account in myGov.
What about couples?
This is where the scheme can become particularly interesting.
FHSSS eligibility is assessed individually. This means two eligible first home buyers purchasing together may each be able to access their own eligible FHSS amounts.
It also means one person’s previous property ownership doesn’t automatically prevent an eligible partner from using the scheme.
Start thinking about it before you find the house
The First Home Super Saver Scheme isn’t something you want to discover after you’ve already found the property you love.
If buying your first home is on the radar, understanding the scheme early gives you time to work out whether it suits your circumstances and how it could fit into your overall deposit strategy.
As with anything involving super and tax, it’s important to understand the rules and consider whether the strategy is appropriate for you before making additional contributions.
Buying your first home involves a lot of moving parts, but knowing what options are available can make the process feel a whole lot clearer. If you’re not sure where to start, the Madd team can help you understand the finance side and what your pathway towards buying your first home could look like.
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