Using your super to purchase your first home

The First Home Super Saver (FHSS) Scheme is aimed at assisting people to purchase their first home by enabling them to save for a deposit in their super.

The FHSS Scheme can help you save for a home deposit faster using the favourable tax treatments of superannuation as well as returns that are generally better than most traditional savings accounts.

You can have up to $15,000 of your voluntary contributions each year – a total of $30,000 over your lifetime – applied to the FHSS. Not only will the contributions be taxed at 15% - lower than most people’s marginal rate – you’ll also receive investment earnings on your contributions.

The FHSS Scheme is different from the First Home Loan Deposit Scheme, which allows eligible first home buyers to purchase a home with a deposit of as little as five per cent and without the need to pay lenders mortgage insurance. You can find out more about the First Home Loan Deposit Scheme from the National Housing Finance and Investment Corporation’s website.

How to participate in the FHSS Scheme

To qualify for the scheme, you must:

  • be 18 years or older.
  • have never owned property in Australia.
  • either live in the premises you are buying or intend to as soon as practicable.
  • you intend to live in the property for at least six months within the first 12 months you own it.
  • have not previously requested a FHSS release of funds.

If you’ve previously owned property in Australia but lost ownership of the premises due to financial hardship, you may still be eligible to participate in the scheme, subject to the ATO’s approval.

Eligibility for the FHSS is assessed individually. This means that couples, siblings or friends can each access their own eligible FHSSS contributions to purchase the same property.

If you’re buying a home with someone who has already purchased a home (for example, you have never owned a home but your partner has), you may still be eligible to participate in the scheme

Eligible contributions

There are two ways to save for a deposit using your super, including making:

  • pre-tax contributions, which include any contributions that you salary sacrifice via your employer or personal contributions for which you’ve claimed a deduction. Check that your total pre-tax contributions fall within the $25,000 annual cap to avoid paying additional taxes.
  • after-tax contributions, which include additional contributions you make but have not claimed a tax deduction on. Ensure that your total after-tax contributions do not exceed the $100,000 annual cap. 

The following are examples are contributions that are not eligible for the FHSS withdrawal:

What to do before you start saving

  • Consider the type of home you wish to live in. The ATO only allows you to use the savings to purchase residential premises in Australia. It excludes property such as houseboats, motor homes and vacant land.
  • Check with us regarding any fees, charges or insurance implications that may apply.
  • Review how the withdrawal of the FHSS funds could impact your tax situation.

How to access your savings

When you’re ready to receive your FHSS savings, request a determination from the ATO using your myGov account. Once you’ve received the determination, you may request the ATO to issue us with a release authority.

There are a couple of things to note:

  • Log in to your account to check how much you’ve saved and to ensure you’ve made all the voluntary FHSS contributions you wish to make prior to requesting a determination.
  • Ensure that you’ve provided the correct information in your determination, otherwise your request for the release of your savings may be cancelled and you won’t be able to apply for a release under the scheme in future.
  • Ensure you agree with the amounts shown in the FHSS determination.
  • You can request a release of the maximum FHSS amount (calculated by the ATO) or a lower amount. However, once you’ve made a request you cannot make another.
  • The maximum amount that you can withdraw is the sum of your eligible contributions, taking into account the $15,000 annual contribution limit, the $30,000 total contribution limit and associated earnings. The maximum amount comprises:
    • 100% of eligible after-tax contributions
    • 85% of eligible pre-tax contributions
    • associated earnings on these contributions as calculated by the ATO.

    You need to apply for and receive the determination from the ATO before signing an agreement to purchase your first home or applying for the release of your savings.

    If you’ve received a determination from the ATO and signed your contract to purchase or construct your home, you must make a valid request to release your savings within 14 days of entering the contract. 

After you’ve made the request to release your money, you have 12 months from the date of the request to sign a contract to purchase or build your home. You’ll need to notify the ATO within 28 days of signing the contract.

Taxes that are applied to the amount you receive

Before releasing the money to you, the ATO will withhold the appropriate amount of tax and offset the balance against any outstanding Commonwealth debts you may have.

Given that the withdrawal will occur during the financial year, the ATO will estimate your marginal tax rate. The ATO calculates the tax they withhold based on your expected marginal tax rate, including the 2% Medicare levy, less a 30% offset. If the ATO is unable to estimate your expected marginal rate, they may apply a 17% tax.

While after-tax contributions are not subject to tax on withdrawal, the following components of the money released will be taxed:

  • Eligible pre-tax contributions
  • Associated earnings on both your eligible pre- and after-tax contributions.

Note that your assessable FHSS released amount is not included in your assessable income for calculating family assistance and child support payments.

Ensure that FHSS is suitable for you

To understand the potential pros and cons of the scheme relative to your personal situation, speak to one of our financial advisers.

Any advice contained in this document is of a general nature only, and does not take into account your personal objectives, financial situation or needs. Prior to acting on any information in this document, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek independent financial advice if you are unsure of what action to take.