Understanding the First Home Super Saver (FHSS) Scheme
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Did you know that as a first home buyer, you may have the option of using your super to buy a property? We show you when it’s possible, how to qualify and what requirements first home buyers must meet to use their superannuation towards a house


Can first home buyers use their super to purchase a property?

First home buyers can sometimes use their superannuation towards the cost of buying their first house. However, that doesn’t mean they can just withdraw money from their super account and use it towards their home deposit. Instead, they need to make extra voluntary contributions into the First Home Super Saver (FHSS) Scheme, which they can then withdraw when it comes time to buy.

What is the First Home Super Saver (FHSS) Scheme?

The FHSS Scheme is designed to let first home buyers save a deposit faster by making additional contributions into their super in order to take advantage of the favourable tax treatment superannuation receives.

The first $25,000 that goes into your super account each year is taxed at just 15% and not at your usual marginal rate. Any compulsory contributions your employer makes, as well as your own voluntary contributions, are counted towards this threshold.

That means you could be contributing more towards your home deposit because less will be eaten up in tax. It also means you could be taking advantage of any growth in your super fund. For instance, over 2019, the average super fund grew by 13.8%, while most savings accounts paid less than two per cent interest.

A first home buyer can contribute up to $15,000 a year under the FHSS Scheme to a maximum of $30,000.


Who is eligible for the First Home Super Saver (FHSS) Scheme?

To be eligible for the FHSS Scheme, you must:

  • Be an Australian citizen at least 18 years of age.
  • Never have owned a property in Australia, including a home, investment property, vacant land or company title interest in land.
  • Live in the property for at least six months within 12 months of buying it, or after it is practical to move in.
  • Never have applied for money to be released from the scheme previously.

You also may be able to still use the scheme even when you’ve previously owned property if you’re suffering financial hardship. The ATO says that examples of circumstances causing financial hardship may include bankruptcy, natural disaster divorce, illness or injury.

To be eligible under the financial hardship provisions, you need to apply to the Commissioner of Taxation.

Unlike most state and territory first homeowner grants, there’s no requirement that you need to buy a new property or a property below a certain threshold in value. It’s purely to help first home buyers save the deposit.

Important things to know

If you’re considering applying for the First Home Super Saver (FHSS) Scheme, there are certain things you should know.

You need to do some groundwork first

Before you start making contributions into the FHSS Scheme, you should contact your super fund to make sure they’ll release your contributions when you’ve found a home you want to buy. You should also ask them about any fees they’ll charge.

Either you or your employer can pay money into the FHSS Scheme

There are two ways you can contribute to the FHSS Scheme.

  • Voluntary concessional contributions. These essentially come from your pre-tax income and can include salary sacrifice contributions. Once in the fund, they’ll usually only be taxed at 15%, so long as you’re under the concessional limit of $25,000. You can also claim a tax deduction on concessional contributions if you make them yourself from your post-tax income.
  • Voluntary non-concessional contributions. These are contributions you make after tax or don’t claim a deduction on.

Not all contributions are eligible

You can’t count any contributions your employer or someone else makes on your behalf. This includes the superannuation guarantee contribution (SGC) of 9.5%, as well as any spousal contributions.

You need to apply to withdraw the money

Before you can get access to the money you’ve saved under the FHSS Scheme, you need to apply for an FHSS determination to have your savings released. You can do this via the myGov website.

If you’re successful, you can withdraw a total of:

  • 85% of any concessional contributions you’ve made (i.e. the amount you contributed minus the 15% tax)
  • 100% of any non-concessional contributions, and

what are known as ‘associated costs’, which is essentially an interest rate applied to your contributions.

The maximum amount you can withdraw also takes into account the $15,000 yearly limit and $30,000 total limit to contributions across all years.

It usually takes between three to five weeks for your fund to release the money, which is paid to the Australian Taxation Office (ATO) and then onto you.

Any money that’s released will also be counted towards your taxable income and the ATO will withhold an amount equivalent to either 17% or your expected marginal tax rate, minus a 30% offset.

There are special rules if you’re building your own home

Vacant land isn’t eligible for the FHSS Scheme. However, if you’re building your own home, the building contract is eligible. So you need to put your savings inside the FHSS Scheme towards this and not towards your deposit on the block of land.

You have 12 months to buy a home

After your savings are released, you have 12 months to purchase your own home or begin construction. When you do sign a contract to buy or build a home, you must notify the ATO within 28 days.

If you can’t meet this requirement, you can re-contribute the funds to your super fund or take a one-year extension. Alternatively, you can keep the money, subject to an additional 20% tax on your assessable FHSS Scheme released amounts.

And finally…

The rules of the FHSS Scheme can be complex and it’s important you consult a financial adviser or tax professional before deciding to commit to saving through the scheme.

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