The First Home Super Saver scheme (FHSS) is an Australian Government initiative, allowing you to save for your home inside your super, helping first home buyers save faster with the concessional tax treatment of superannuation. There are rules around eligibility, tax, limits and timing that you should consider if you're thinking about taking advantage of the scheme to help you get into your first home sooner.
How FHSS works
The Australian Government introduced the First Home Super Saver (FHSS) scheme to reduce pressure on housing affordability. It is designed to allow first home buyers to save towards a home deposit in their super fund.
Under the FHSS scheme, you can make either before-tax contributions or after-tax contributions to your super. You can then withdraw the funds when you are ready to buy a home to live in.
Eligibility criteria
To be eligible, you must be a first home buyer and over 18 when requesting the release. Additionally:
- The home you are buying or building must be in Australia
- You must plan on living 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, after it is practical to move in
- You haven't previously used the FHSS scheme.
Tax considerations
Taxed going in
If you contribute using a salary sacrifice arrangement or as tax-deductible super contributions, the super fund will levy a 15% contributions tax. This 15% tax rate may be lower than the normal marginal tax rate you pay on your income.
Taxed coming out
The FHSS release amount that you eventually withdraw from your fund for the purchase, together with associated earnings, will be subject to withholding tax at your marginal tax rate, less a 30% tax offset. This amount plus the FHSS amount are included in your tax return for the year you request the release.
Maximum release limits
You can apply to release your eligible contributions from your super fund, comprising of:
- A maximum of $15,000 from any one financial year
- Up to a total of $30,000* across all years.
You will also receive an amount of earnings that relate to those contributions, calculated by the ATO.
The rules are per person, so if a couple uses the FHSS scheme, this means a maximum of $60,000*.
Contributions must be voluntary, so Superannuation Guarantee (SG) amounts paid by your employer cannot count towards your FHSS savings.
Determining the available amount
To confirm the amount available for withdrawal, you must apply for an FHSS determination through myGov before signing a contract for your first home and before applying for the release of your FHSS amounts.
It is possible to apply for an ATO determination to confirm the amount available for withdrawal as many times as you like. It doesn't trigger the withdrawal until you apply for a release of funds.
Applying for a release of funds
You can request the release of your FHSS amount around the same time you start your home buying activities - you don't have to wait until you sign a contract. However, you must have a determination from the ATO. If you've received a determination and signed a contract, you must request a release within 14 days of signing the contract.
After you have requested the release, it may take between 15 and 25 business days to process.
Once processed, you have 12 months from when you request your release to enter into a contract to purchase/construct. You can only request a release once under the FHSS scheme. If your release request is cancelled, you will not be able to apply again in the future.
Notifying the ATO once a contract is signed
Once you have signed a contract (and in addition to requesting the release), you must notify the ATO (via myGov) within 28 days of signing.
Important considerations
Before participating in the FHSS scheme, you should:
- Consider your individual circumstances and whether saving for a home deposit in the superannuation environment is right for you
- Check with your employer to confirm they offer salary sacrifice arrangements
- Check with your super fund to confirm they will be able to release the funds and whether extra charges will apply
- Check you are eligible for the scheme
- Consider the limits, timing and availability of the funds, taking into account where you are at in your home buying journey.
*The 2021-22 Federal Budget included an increase to the maximum release amount for an individual from 1 July 2022 to $50,000.
Want to learn more?
You can learn more about the FHSS scheme at ato.gov.au. Alternatively, contact a member of our Finance Solutions team if you would like assistance with arranging finance for your property, or contact a member of our Private Wealth team for advice around your personal tax and superannuation strategies.
Marie Ryan is an accredited finance broker and authorised credit representative 519653 of BDO Corporate Finance Ltd (ACN 010 185 725) Australian Credit Licence 24551. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.
The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.