What is the First Home Super Saver Scheme?

The Australian Government introduced the first home super saver (FHSS) scheme in 2017 to help first-time homebuyers save for their first home. Under this program, you can make voluntary contributions towards your superannuation account and withdraw them later to use as a deposit on your first home. 

One important thing to note is that you can only use your own voluntary contributions. That means those made by your spouse, employer, or the government are out of the question.  

Am I eligible for the first home super saver scheme? 

To be eligible for the FHSS, you’ll need to meet a few criteria set by the Australian Government. You’ll need to:  

• be at least 18 years of age to access FHSS (or request a determination, which we’ll cover shortly)
• have never owned property in Australia before
• have your name on the property title
• have not made any previous withdrawals (or requested the release of funds) under the FHSS
• intend to live in the property you are purchasing as your primary residence within 12 months of settlement, for at least six months. 

You don’t have to be an Australian citizen or even a resident for tax purposes to be able to access the scheme. 

But you do need to build or buy a residential property. Any other kinds of property, say a motor home or a commercial property, aren’t eligible. 

How much can I save with the first home super saver scheme? 

Would-be homeowners might find that the FHSS helps them (1) save up for a deposit and (2) pay less tax. 

The voluntary concessional contributions you make to your super will be taxed at a lower rate of 15%, as opposed to your marginal tax rate, which can be much higher than this, depending on your income. (A pleasant side-effect of this is that the higher your marginal tax rate, the more rewarding it all gets for you.) 

This also means that setting aside any windfall, for instance, can reduce your taxable income and increase your take-home pay. 

Here’s how it looks:

Say you have a taxable income of $65,000 and you use $5,000 of that each year as a voluntary contribution to your super).

After 10 years, the Commonwealth Superannuation Corporation’s FHSS calculator shows you’ll have $60,514 saved towards a deposit.

That’s $21,839 more than if you saved the same amount in a standard savings account.

But keep in mind that there are restrictions on the amount that can be contributed and withdrawn under FHSS.  

For instance, you can contribute as much as $15,000 per year, or a total of $50,000 across several years. 

You can also withdraw a maximum of $15,000 per financial year. If you want to take out more than this amount, you can do so – but only up to a total of $50,000 in a span of two or more years. 

Helpful tip:

Many Australians can salary sacrifice their FHSS contributions; the money is added into their super before income tax is applied. This strategy is typically tax-efficient and often works well for middle- to high-income earners. 

Of course, it’s also possible to contribute to your super after income tax is applied. But your annual take-home pay will be lower than if you choose to salary sacrifice these contributions.

We recommend discussing this option with a financial planner first.

Debbie Shankar

Former Group Content Manager, Lendi

How does the first home super saver scheme work? 

Here’s how it all unfolds: 

1. Make sure you understand how the scheme works, whether your contributions are eligible for FHSS, and whether your super provider will release funds for FHSS.
2. If you want to give FHSS a red-hot go (and you’re eligible to do so), start making voluntary concessional contributions to your superannuation fund. You can add up to a maximum of $15,000 per year, or $50,000 in a span of multiple years. 
3. You can contribute through voluntary super contributions, which can be any of the following: 
   1. voluntary concessional contributions – that is, contributions you make by salary sacrificing, which get a better tax rate
   2. voluntary non-concessional contributions – that is, contributions you make from your salary after tax 
   3. some transfer amounts from foreign super funds. 
4. When you’re almost ready to buy your first property – like when you start talking to a mortgage broker or lender for a pre-approval – you can begin requesting the release of funds from FHSS. How much you can access depends on the amount of eligible contributions you’ve made. 
5. Request a determination from the ATO. Basically, you fill in a form, the ATO evaluates your situation, and then they tell you how much of your super can be released under FHSS.
6. Make a request for the release of your super savings. You can request any amount up to the maximum figure the ATO gave you. 
7. Sign a contract for your first property and let the ATO know. You have a year to purchase or build your first home (potentially plus another 12-month extension). If you don’t purchase a home within the specified timeframe, you’ll need to put the funds back into your super. Either that or pay the FHSS tax, which is 20% of your assessable FHSS released amount. 
8. Get the money! 

How do I access the funds in my first home super saver scheme? 

When your FHSS is ready to go, the ATO will give your super fund (or funds) a release authority. This tells your super to transfer the agreed amounts to the ATO, who will then transfer it to your nominated bank account. 

It usually takes between 15 and 20 business days before the released amount reaches your bank, so keep this in mind if you’re time-crunched! 

Is the first home super saver scheme right for me? 

There are three things to consider when thinking about FHSS and if it’s for you: 

• Eligibility. Do you satisfy all the eligibility requirements that are outlined above?
• The cons. FHSS isn’t all rainbows and butterflies. Sure, the scheme does help you build up your deposit while saving tax in the process. But it can also be a pain for some people because of the following:
  • You’re at the mercy of the ATO and your super fund’s timeline.
  • The limit of $50,000 that you can withdraw might not be enough as a deposit. Considering the average dwelling price in Australia is $959,300,¹Australian Bureau of Statistics – Total Value of Dwellings you’ll need way more than $50,000 to meet the usual 20% required deposit – at least to avoid paying lenders mortgage insurance. (Unless you also set aside some money in your regular savings account or managed funds.) 
  • All the paperwork and forms you need to fill out, on top of the ones that have to do with the actual purchase of the property, could immediately send you to stress town.
• The property you’re eyeing. Are you planning to buy a home you’ll actually live in? Or have you set your sights on an investment property or mobile home? If it’s the latter, you’re better off considering alternative ways to save for a deposit. 

What are some alternatives to the first home super saver scheme? 

If you think FHSS isn’t quite right for you, then here are some other ways you can build your deposit and get a hold of that dream first property: 

Where can I find and compare home loans? 

As you build up your deposit savings, you might find yourself shopping around for home loan offers too. If you do, know that iSelect and Lendi have partnered together to help you find and compare home loans. Check out loans from 25+ lenders today.