First Home Super Saver Scheme: a guide for homebuyers

Tell me the basics – how does it work?

Purchasing a home is a significant financial milestone, but the ever-increasing property prices make it challenging for first-time buyers in Australia to enter the market.

To help ease this burden, the Australian government created the First Home Super Saver Scheme (FHSSS), aimed at helping first-time buyers save for their first property purchase.

When it comes to saving for your first home, super probably isn’t an investment option that springs to mind. Generally, super can only be accessed once you’ve retired or met another ‘condition of release’, which could be a long way down the track.

However, under the FHSSS, you may be able to make voluntary contributions to super, and you may be eligible to withdraw these amounts, plus associated earnings¹ to put towards a deposit on your first home.

One of the main benefits of the FHSS scheme, which became operational from 1 July 2017, is it allows aspiring homeowners to save money for their first property within their super fund, taking advantage of tax concessions and potentially accelerating their path to home ownership.

Qualifying for the First Home Super Saver Scheme

To participate in the FHSS scheme, you must meet certain eligibility requirements:

• Be at least 18 years old when you request a FHSSS determination.
• Never have owned property in Australia (including an investment property, commercial property, or land).
• Your name must be on the title of the property you purchase.
• Have not previously made a FHSSS release request.
• You must genuinely intend to the property you buy as soon as practicable and for at least 6 months within the first 12 months you own it once it’s practical to move in.
• Make voluntary super contributions.

Super contributions under the FHSSS

You can make voluntary contributions of up to $15,000 per year within your ordinary contribution caps and can withdraw a maximum of $50,000 of voluntary contributions plus earnings (calculated at a set rate by the ATO on the amount you withdraw²).

Voluntary contributions include:

• Salary sacrifice.
• Personal after-tax contributions.
• Personal contributions you’ve claimed a tax deduction for.
• Employer contributions above minimum required (Super Guarantee).

Voluntary contributions do not include:

• Mandatory employer contributions (Super Guarantee).
• Spouse contributions.
• Government co-contributions.
• Contributions made for you by another person.

Tax benefits

The primary advantage of the FHSS lies in the tax concessions it offers.

Earnings in super are taxed at up to 15% and are concessionally taxed when you make a withdrawal from super under the scheme. Earnings on investments or bank accounts in your own name are taxed at your marginal tax rate (MTR) which could be up to 47%.³

Also, depending on the type of contributions you make, these amounts may reduce your assessable income for the year and therefore reduce tax payable.

The tax effectiveness of the scheme may free up more of your hard-earned funds and increase the amount you can save for that home deposit.

Steps to utilise the FHSSS

There are quite a few stages involved in the process of participating in the FHSSS and accessing the funds when the time comes to buy your home, but by following these steps, the process will be fairly straightforward:

• Check eligibility – Before diving into the scheme, ensure that 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 you to reach that goal. This will help you plan your contributions accordingly.
• Super contribution strategy – Create a super contribution strategy that combines before and after-tax super contributions to maximise your savings. Keep in mind the annual contribution caps to avoid exceeding them.
• Confirm with your super fund – Check that your super fund will release FHSS eligible contributions. Ensure that your name and address in the super fund’s records are the same as the details held by the ATO.
• Make voluntary contributions – Begin making voluntary contributions to your super fund. Regularly monitor your progress towards your savings goal.
• Request and receive a FHSS determination – A FHSS determination provides you with the maximum amount you’re eligible to withdraw. You can request a determination via myGov. You’ll need to have requested and received a determination from the ATO before signing a contract of sale or for construction⁴, or purchasing a home at auction. If you don’t, you won’t be eligible to access the contributions you’ve made to super.
• Request to withdraw funds – Provided you’ve received your FHSS determination, you may request to release (or withdraw) an amount up to the figure noted in the FHSS determination before or after you sign a contract. However, if you apply for the release authority after you’ve signed a contract, you need to make sure you do so within 14 days. From 20 September 2024, the applicant will have 90 days to request a release authority after they enter a contract to purchase or construct a home. A release request can be made via myGov.
• Use the savings – Upon approval, you will receive the released funds and earnings into your bank account. These funds can now be used to purchase or construct your first home.

Taxation of funds

Some of the amount withdrawn is subject to tax (known as the assessable amount). This includes any concessional contributions⁵ 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.⁶

What happens after applying to release funds?

It generally takes the ATO between 15 and 20 business days to send the funds to you (see ato.gov.au). You’ll need to purchase a home or sign a construction contract within 12 months of receiving the funds. If you don’t, the ATO automatically provides an additional 12-month extension to you, and will notify you in writing. After you sign a contract you must notify the ATO within 28 days.

You must move into your home as soon as possible after purchase or construction is complete, and you must intend to live there for at least six of the first 12 months.

If you still haven’t purchased a home or signed a construction contract within that timeframe, you’ll need to either:

• recontribute the funds to super as a non-concessional contributions for which you can’t claim a tax deduction and notify the ATO⁷, or
• pay FHSS tax of 20% on the assessable amount that was released to you, which is in addition to any tax payable on the withdrawal.⁸

Benefits and considerations

The FHSS scheme offers several benefits for aspiring homeowners, including:

• Tax savings – The scheme provides significant tax benefits, allowing you to save money faster than with a regular savings account.
• Accelerated savings – By contributing through your super, you can take advantage of compound interest returns and potentially accumulate a larger deposit for your home.
• Flexible contributions – You can adjust your contributions as per according to your financial situation and take advantage of bonus contributions from employers if available.
• Joint applications – If you are purchasing a property with your partner, both of you can use the FHSSS scheme to maximise your savings.

Despite its advantages, there are some considerations to bear in mind:

• Early release penalty – If you decide not to purchase a property after releasing your FHSSS funds, you must either recontribute an amount to super equal to at least your assessable FHSSS released amount less any tax withheld or, keep the released amount and pay FHSSS tax of 20% of your assessable FHSSS released amount. This may face a tax penalty, which can offset some of the scheme’s benefits.
• Impact on retirement savings – Withdrawing funds from your super may reduce your retirement savings. Ensure that you are comfortable with the trade-off between home ownership and retirement savings.
• Property market fluctuations – The real estate market is subject to fluctuations, and the value of your potential home may decrease over time.

What if you change your mind?

If you change your mind after you’ve contributed to super and no longer intend to purchase a home, the money you’ve contributed to super won’t be accessible.

If you change your mind after the funds have been released, you’ll need to either recontribute the money to super, or pay additional FHSS tax.

From 20 September 2024, if you change your mind before the funds have been released, you can amend or withdraw your FHSSS application. You can then re-apply in future should the need arise once you have withdrawn your application. Currently, one of the eligibility criteria requires an applicant to not have previously requested a release from superannuation under this scheme.

What next?

The FHSS scheme is a valuable initiative to help first-time buyers overcome the challenges of entering the property market.

By taking advantage of the tax concessions and the savings opportunities it offers, you could accelerate your path to home ownership. However, it’s essential to consider the long-term impact on your retirement savings and understand the eligibility criteria as well as withdrawal process before committing to the scheme. For more information, see the ATO website.

To find out more about the FHSSS and to understand the different ways you can contribute, and the benefits it may provide to you, we recommend you seek financial advice. You may also be eligible for state/territory based stamp duty concessions or first home buyer grants and you should seek further information from the revenue office in your location.

 * Based on KPMG Super Insights 2023 Report as at May 2023 KPMG Super Insights 2023 Report

1 Earnings are deemed to accrue at a set rate known as the shortfall interest charge (SIC). 

2 Earnings are calculated by the ATO at a set rate rather than reflecting actual fund earnings. The rate is the shortfall interest charge.

3 Including Medicare Levy.

4 If you’re building a home, you need to ensure you have applied for a FHSS determination before purchasing vacant land.

5 Concessional contributions include personal contributions which you have claimed as a tax deduction and salary sacrifice amounts.

6 If the ATO can’t estimate your income for the year and therefore your MTR, they will withhold tax on the assessable amount at 17% and any adjustment will occur when you submit your tax return for the year.

7 You can notify the ATO via your myGov account.

8  This will also apply if you recontribute the amount to super but you don’t notify the ATO.

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at June 2024 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.
The Financial Coaches provide financial advice under the Australian Financial Services licence (AFSL) of Actuate Alliance Services Pty Ltd ABN 40 083 233 925 AFSL 240 959 (Actuate). NULIS Nominees (Australia) Limited ABN 80 008 515 633, AFSL 236465 (NULIS) is the trustee of MLC Super Fund ABN 70 732 426 024 (Fund). Actuate and NULIS are both companies within Insignia Financial Group which comprises Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). No other entity within Insignia Financial Group, including NULIS or any other entity within the Insignia Financial Group that is a trustee for a regulated superannuation fund, is liable for or responsible for any work, action or advice provided by Actuate.