Australian Government First Home Super Saver
Want to get into your first home sooner? The First Home Super Saver Scheme (FHSSS) is designed to help eligible first home buyers save for a deposit more efficiently.
What is the First Home Super Saver Scheme (FHSSS)?
The First Home Super Saver Scheme (FHSSS) is a government initiative designed to help eligible first home buyers save for a home deposit through their superannuation.
Instead of saving entirely in a regular bank account, you can make voluntary contributions to your super and, when you're ready to buy, apply to withdraw those contributions (along with associated earnings) to put towards your first home.
Eligible participants can currently release up to $15,000 of voluntary contributions from a single financial year, up to a maximum of $50,000 across all eligible years (for contributions made since 1 July 2017), plus associated earnings.
It's important to note that only voluntary contributions qualify under the scheme. These include salary sacrifice contributions and personal voluntary contributions. Your employer's compulsory Super Guarantee (SG) contributions cannot be accessed under the FHSSS.
Benefits of using the First Home Super Saver Scheme.
The First Home Super Saver Scheme (FHSSS) can help eligible first home buyers grow their deposit faster by taking advantage of the tax benefits of superannuation.
Voluntary contributions, such as salary sacrifice contributions, are generally taxed at 15% within your super fund. If your personal marginal tax rate is higher than this, you may be able to save more towards your deposit compared to saving from your after-tax income.
Another advantage is that when you withdraw your eligible contributions, you'll also receive associated earnings. These earnings are calculated by the Australian Taxation Office (ATO) using a prescribed rate, which may be higher than the interest earned in a standard savings account.
For example, if you made a voluntary contribution of $10,000 to your super and, over time, the ATO calculated $1,000 in associated earnings, you could potentially withdraw $11,000 under the FHSSS (subject to eligibility and scheme limits).
The scheme is assessed individually, which means couples can each access their own eligible FHSSS amounts and combine them to boost their home deposit.
How to make voluntary super contributions.
If you're considering using the First Home Super Saver Scheme (FHSSS), you'll first need to make eligible voluntary contributions to your superannuation. There are two common ways to do this:
Salary sacrifice contributions – Ask your employer to direct part of your pre-tax salary into your super fund.
Personal voluntary contributions – Make after-tax contributions directly to your super fund.
If you plan to claim a tax deduction for personal contributions, you'll generally need to lodge the appropriate notice with your super fund before applying to release funds under the FHSSS. Tax-deductible contributions are also subject to the relevant super contribution caps.
It's important to remember that the standard superannuation contribution limits continue to apply when using the FHSSS. Exceeding these limits may result in additional tax.
The rules surrounding superannuation, taxation and the FHSSS can be complex and may not be suitable for everyone. Before making voluntary contributions, consider seeking advice from a licensed financial adviser or registered tax adviser to ensure the strategy is appropriate for your circumstances.
If you'd like to understand how the FHSSS could fit into your home buying plans, Redlend Home Loans can help explain how the scheme works from a lending perspective and how it may assist you in reaching your deposit goal sooner.
Accessing your FHSSS savings.
When you're ready to purchase your first home, you can apply to the Australian Taxation Office (ATO) to release your eligible First Home Super Saver Scheme (FHSSS) savings to use towards your deposit.
The amount you can access is subject to the FHSSS rules and includes:
100% of eligible voluntary after-tax (non-concessional) super contributions.
85% of eligible salary sacrifice (concessional) contributions.
85% of eligible tax-deductible personal (concessional) contributions.
Any associated earnings calculated by the ATO.
The FHSSS currently allows eligible participants to release up to the applicable annual and lifetime limits set by the Australian Government, together with associated earnings.
Example
Imagine you made the following voluntary contributions in one financial year:
$5,000 through salary sacrifice.
$3,000 as an after-tax personal contribution.
Under the FHSSS, you could generally apply to release:
$4,250 (85% of your eligible salary sacrifice contributions).
$3,000 (100% of your eligible after-tax personal contributions).
Plus any associated earnings calculated by the ATO.
Eligibility requirements and release limits apply, and the amount available to you will depend on your individual circumstances. If you're unsure how the FHSSS works or how it could help you purchase your first home, Redlend Home Loans can explain the scheme from a home lending perspective and help you understand how it may fit into your home buying journey.
Important things to consider
Releasing funds under the First Home Super Saver Scheme (FHSSS) may have taxation implications. Some of the amount you withdraw may be included in your assessable income, although eligible amounts generally receive a 30% tax offset. The Australian Taxation Office (ATO) will provide the relevant payment summary to assist you when completing your tax return.
If you receive Centrelink payments or other government benefits, it's also worth checking whether an FHSSS withdrawal could affect your entitlements.
As everyone's circumstances are different, we recommend speaking with a licensed financial adviser or registered tax adviser before making decisions about your superannuation or accessing funds through the FHSSS. For the latest information, visit the Australian Taxation Office (ATO) website.
Rules to Know.
Before relying on the First Home Super Saver Scheme (FHSSS), it's important to understand some of the key rules and conditions:
The property must be a residential property located in Australia. The scheme cannot be used to purchase assets such as houseboats or motorhomes.
Once your FHSSS funds have been released, you generally have 12 months to purchase an eligible property or sign a contract to build your first home.
After entering into a contract, you'll need to notify the Australian Taxation Office (ATO) within the required timeframe.
If you're unable to purchase or build within the initial 12 months, you may be able to apply to the ATO for a further extension.
If you ultimately don't purchase or build an eligible home, you'll generally need to either recontribute the released funds to your superannuation (subject to the relevant rules) or pay the applicable FHSSS tax.
Any eligible concessional contributions and associated earnings released under the FHSSS may form part of your assessable income, although eligible amounts generally receive a 30% tax offset.
One of the most important steps is obtaining an FHSS determination from the ATO before signing a contract to purchase a property. There are also strict timeframes for requesting the release of your funds, so it's important to understand the process before committing to a purchase.
As eligibility requirements and FHSSS rules may change, always refer to the ATO for the latest information or seek advice from a licensed financial adviser or registered tax adviser before proceeding
Who is eligible for the First Home Super Saver Scheme?
To be eligible for the First Home Super Saver Scheme (FHSSS), you generally need to meet the following criteria:
Be 18 years of age or older when you apply to release your FHSSS savings.
Not have previously owned residential property in Australia, unless you qualify for the FHSSS financial hardship exemption.
Not have previously accessed the FHSSS by requesting a release of funds.
Intend to live in the property as your principal place of residence for at least six of the first 12 months after it becomes suitable to occupy.
As eligibility requirements can vary depending on your circumstances, it's important to check the latest Australian Taxation Office (ATO) guidelines or seek professional advice before relying on the scheme.