First Home Super Saver Scheme (FHSS) Explained
Struggling to save a deposit for your first home? The FHSS scheme lets you save inside super with a significant tax advantage, potentially accelerating your path to home ownership by thousands of dollars.
What Is the FHSS Scheme?
The First Home Super Saver Scheme allows first home buyers to make voluntary contributions into their super fund and later withdraw those contributions (plus deemed earnings) to put towards a home deposit. The key advantage is the favourable tax treatment: concessional contributions are taxed at just 15% inside super, compared to your marginal tax rate outside super.
Introduced by the Australian Government in the 2017-18 Budget, the FHSS was designed to help Australians save faster for their first home by leveraging the tax-advantaged environment of superannuation. It's administered by the ATO, and your super fund holds the contributions until you request a release.
The scheme is available to individuals, meaning a couple buying together can each access their own FHSS amounts separately, potentially doubling the benefit. You don't need to buy jointly to both use the scheme.
Important: You can only use the FHSS once. If you request a determination or release and then decide not to buy, specific rules apply. Make sure you understand the process fully before applying.
Contribution Limits and Rules
The FHSS has specific limits on how much you can contribute and subsequently withdraw. Understanding these limits is essential to maximising the benefit without running into complications.
You can contribute up to $15,000 per financial year in voluntary contributions that count towards the FHSS. The total lifetime cap is $50,000 across all years. Both concessional (before-tax) and non-concessional (after-tax) voluntary contributions are eligible.
What Counts Towards FHSS
- Salary sacrifice contributions - arranged through your employer
- Personal deductible contributions - you contribute personally and claim a tax deduction
- Personal non-concessional contributions - after-tax money (no deduction claimed)
What does NOT count: Employer SG contributions, spouse contributions, government co-contributions, or contributions made before 1 July 2017.
These contributions still count towards your overall concessional ($30,000) and non-concessional ($120,000) caps. You're not getting extra cap space; you're using the existing caps and earmarking voluntary contributions for the FHSS.
The Tax Advantage
The real power of the FHSS lies in the tax savings on concessional contributions. When you salary sacrifice or make a personal deductible contribution, that money is taxed at 15% inside super rather than at your marginal rate.
Example: Tax Savings with FHSS
James earns $85,000 and salary sacrifices $15,000 into super for the FHSS over one financial year.
Without FHSS: James pays 34.5% tax (including Medicare) on $15,000 = $5,175 tax. He keeps $9,825.
With FHSS: The $15,000 is taxed at 15% inside super = $2,250 tax. His super holds $12,750.
On withdrawal, the released amount is taxed at his marginal rate less a 30% offset. Even accounting for this, the net saving is significant.
Over 3 years at $15,000/year, total FHSS savings could be $4,000-$8,000 more than saving outside super (depending on marginal rate and investment returns).
How Withdrawals Work
When you're ready to buy, you apply to the ATO to release your FHSS amounts. The process has two steps: first you request a determination (to see how much you can release), then you request the actual release of funds.
The ATO calculates your releasable amount based on your eligible contributions plus a "deemed" rate of return (the 90-day Bank Bill rate plus 3 percentage points). This deemed return applies regardless of how your super fund actually performed, which can work for or against you.
For concessional contributions, 85% of the contribution amount is released (the other 15% was already taken as contributions tax). For non-concessional contributions, 100% is released since no tax was applied on entry.
Withdrawal tax: Released concessional amounts are included in your assessable income but receive a 30% tax offset. Non-concessional released amounts are not taxed again. The ATO will issue a PAYG withholding on the release at your expected marginal rate minus the offset.
The Application and Settlement Process
Timing is critical with the FHSS. There are strict deadlines between receiving your funds and signing a contract to purchase property, and getting this wrong can result in penalties.
- Request a determination: Apply through your myGov account linked to the ATO. This tells you how much you can release but doesn't commit you to anything.
- Request a release: Once you're ready to buy, request the actual release of funds. The ATO instructs your super fund to pay the amount.
- Receive funds: Your super fund has up to 25 business days to release the money to the ATO, which then sends it to you.
- Sign a contract: You must sign a contract to purchase or construct a home within 12 months of requesting the release (extensions may be available in limited circumstances).
If you don't sign a contract within 12 months, you can either apply for an extension, recontribute the amount into super (as a non-concessional contribution that doesn't count towards your cap), or keep the money and pay FHSS tax of 20% on the assessable portion.
Property Requirements
The property must be in Australia and you must intend to live in it as soon as practicable (generally within 12 months of settlement). You can purchase an existing dwelling, a new build, or land on which to build. The property cannot be purchased from a related party.
Eligibility Requirements
Not everyone can access the FHSS. The ATO has clear eligibility criteria that must be satisfied at the time you request a release of funds.
- You must be at least 18 years old
- You must never have owned property in Australia (including investment property)
- You must not have previously requested an FHSS release
- You must intend to occupy the property as your home for at least 6 months within the first 12 months of ownership
There is a nuance for couples: each person's eligibility is assessed individually. If one partner has previously owned property, they cannot use the FHSS, but the other partner may still be eligible provided they meet the criteria.
Couples Buying Together
If both partners are eligible, each can contribute up to $50,000 over time, providing a combined FHSS pool of up to $100,000. This can make a substantial difference to your deposit, especially in expensive capital city markets where deposits of $100,000 or more are commonplace.
How Talk Through Wealth Helps
The FHSS involves balancing contribution limits, tax savings, and timing. Talk Through Wealth helps you model the full picture so you can maximise your deposit savings.
- Calculate the optimal FHSS contribution amount based on your income and tax bracket
- Compare FHSS savings growth versus a standard savings account
- Model the impact of using FHSS on your long-term super balance
- Project your total deposit including FHSS, regular savings, and other sources
- Factor in the withdrawal tax to determine your actual net deposit amount
Model Your FHSS Savings Strategy
See how the First Home Super Saver Scheme could help you get into your first home sooner.
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