First Home Super Saver Scheme (FHSS)

What is the First Home Super Saver Scheme?

The First Home Super Saver (FHSS) Scheme is a Commonwealth Government agency initiative designed to help first-time home buyers save money for their house deposit through their super account. This approach offers valuable tax benefits, allowing you to save more effectively than with a standard savings account, potentially increasing your take home pay while building your deposit. Additionally, the 'taxable component' of the released amount is subject to a 30% tax offset, which can further reduce your tax liability.

Eligibility for the FHSS scheme

To satisfy the eligibility requirements for the FHSS Scheme, you must:

• Be at least 18 years old when applying to withdraw money
• Intend to live in the same property after purchase
• Occupy the property for at least 6 months within the first 12 months of ownership
• Be a first home buyer and not have previously owned property in Australia (with exceptions for financial hardship cases)
• Not be purchasing a commercial property (the scheme is for residential properties only)

How the FHSS scheme works

The FHSS Scheme allows you to make voluntary contributions to your super account that can later be withdrawn specifically for your first home deposit. The maximum amount you can release is $50,000 (as of 2025).

You can make two types of contributions:

• Concessional contributions (before-tax, like salary sacrifice)
• Non-concessional contributions (after-tax personal contributions)

Concessional contributions are subject to an annual concessional contributions cap, which limits the amount you can contribute before tax each financial year.

These contributions benefit from concessional tax treatment, potentially reducing your income tax while helping you save faster than with a standard savings account.

Making eligible contributions

To maximise the benefits of the FHSS Scheme:

• Only contributions made after July 1, 2017, are eligible
• You can make extra contributions above employer contributions (your superannuation guarantee amounts)
• Contributions count toward your annual super contribution caps (e.g. the $25,000 per year concessional contributions cap)
• The eligibility criteria for contributions are assessed by the ATO
• You can make additional contributions each financial year up to $15,000.

It's important to know that if you are making concessional contributions, only 85% will count towards the FHSS maximum release calculation.

How much you can save

The FHSS Scheme allows you to:

• Release a maximum amount of $50,000 in eligible contributions
• From up to $15,000 of eligible contributions from any one financial year
• Have your earnings calculated using a deemed earnings formula set by the government
• Save potentially thousands in tax compared to saving through a regular bank account

Example: salary sacrifice

In the 2024–2025 financial year, Anna made $20,000 salary sacrifice (concessional contributions). Because of the annual limit, only $15,000 will count as eligible FHSS contributions and only 85% of that $15,000 ($12,750) will count towards the calculation of the maximum releasable amount.

In this example, the remaining $5,000 salary sacrifice contributions cannot be counted towards her maximum releasable amount.

Requesting a FHSS determination and release

When you're ready for house hunting and to access your savings:

1. Apply to the Australian Taxation Office (ATO) for a FHSS determination through your myGov account
2. Request this determination before any property ownership transfers to you
3. After receiving your determination, submit an FHSS release request
4. Before the funds are released, the ATO will check for any outstanding Commonwealth debts
5. The released amount will be paid directly to your bank account, with tax withheld

Using your FHSS amount

Your FHSS funds must be used within 12 months of release to:

• Purchase or build a residential property in Australia (motor homes and house boats don't count)
• Secure a home you intend to live in (not vacant land or investment properties)
• Occupy the property as soon as practical after purchase
• Live in the property for at least 6 months within the first 12 months of ownership

You can combine your assessable FHSS released amount with other savings and financing options to purchase your first home.

What if you don't buy a home?

If you don't purchase within the 12 months, you can request an extension to 24 months.

If you don't buy a home within this time, you must either:

• Return the money to your superannuation account, or
• Pay a tax equal to 20 percent of the concessional amount released (reversing the tax concession you received).

Tax benefits and implications

The FHSS Scheme offers several tax advantages:

• A 30% tax offset on assessable FHSS amounts
• Concessional contributions are taxed at just 15% (likely lower than your expected marginal tax rate)
• Non-concessional contributions aren’t taxed again within super
• When withdrawn, associated earnings are added to your assessable income but with a 30% tax offset

The assessable FHSS released amount is added to your taxable income, but the 30% tax offset helps reduce the overall tax liability.

When you release funds:

• The ATO will issue a payment summary at the end of the financial year
• You’ll need to include this in your tax return
• Your expected marginal rate plus Medicare levy will apply, less the 30% offset
• This is generally more favorable than paying tax at your full marginal rate

Financial hardship provisions

If you've previously owned property but lost it due to financial hardship, you may still be eligible for the FHSS Scheme:

• Apply to the ATO for a FHSS hardship determination
• Meet specific criteria regarding your financial situation
• If approved, you can access your FHSS amount despite previous property ownership

State government concessions

The FHSS Scheme operates independently of state government concessions:

• You can use both the FHSS Scheme and state government first home buyer concessions
• Using state concessions doesn't affect your ability to access the FHSS Scheme
• Check with your state revenue office for specific first home buyer concessions in your area

Important timeframes

After receiving your FHSS funds:

• You must sign a contract to buy or build within 12 months of your FHSS release request
• You can request a 12-month extension from the ATO if needed
• If you don't buy within the timeframe, you must either:
  • Recontribute the released amount to your super, or
  • Keep the funds and pay tax in the form of FHSS tax (a flat tax of 20%)

FHSS Scheme example

Charlie earns $100,000 and saves $200 per week for a first home deposit:

• By using the FHSS Scheme, Charlie makes personal contributions of $10,400 annually
• Charlie saves an extra $1,768 each year due to the tax advantages
• When released, Charlie's expected marginal rate (with the 30% offset) applies to the deemed earnings
• This results in significantly more savings compared to using a standard savings account

First Home Super Saver Scheme benefits

The First Home Super Saver (FHSS) Scheme offers several compelling benefits for individuals saving for their first home deposit. One of the primary advantages is the ability to make voluntary contributions to your superannuation account, which can result in a lower marginal tax rate. By making before-tax contributions, such as salary sacrifice contributions, you can benefit from a tax deduction, effectively reducing your taxable income.

Additionally, the scheme provides a 30% tax offset on the assessable FHSS released amount, which can significantly reduce your income tax liability. This means more of your hard-earned money goes towards your home deposit rather than taxes. The FHSS Scheme also allows for personal contributions, including personal after-tax contributions, giving you flexibility in how you save.

Saving through the FHSS Scheme can be more tax-effective than traditional savings methods, potentially resulting in a higher deposit amount. This is particularly beneficial for first home buyers, as it helps accumulate the necessary funds for a home deposit more efficiently. Overall, the FHSS Scheme is designed to make the dream of homeownership more attainable by leveraging the tax advantages of superannuation savings.

First Home Super Saver Scheme limitations

While the First Home Super Saver (FHSS) Scheme offers numerous benefits, it’s important to be aware of its limitations. One key limitation is the property value cap of $750,000, including land, which may not be suitable for all buyers, especially in high-cost areas. Additionally, the scheme has a maximum contribution limit of $15,000 per financial year and a total contribution limit of $50,000. For some individuals, these limits may not be sufficient to cover their entire home deposit.

The scheme also requires that you intend to occupy the property as your primary residence, which may not align with everyone’s plans. Furthermore, the FHSS Scheme has specific rules regarding the type of property that can be purchased. For instance, it does not support the purchase of vacant land unless you plan to build a home on it.

Another consideration is that the scheme is not available to individuals who have previously owned property, except in cases of financial hardship. This restriction ensures that the benefits are targeted towards genuine first-time buyers. Understanding these limitations can help you make an informed decision about whether the FHSS Scheme is the right tool for your home savings strategy.

Completing your tax return

When it comes time to complete your tax return, it’s essential to include the assessable FHSS released amount for the year you requested the release. This amount will be subject to a 30% tax offset, which can help reduce your overall income tax liability. Additionally, you should report any FHSS tax deductions, as these can further lower your taxable income.

You will also need to report any personal contributions, including personal after-tax contributions, made to your superannuation account. Keeping accurate records of your FHSS contributions and withdrawals is crucial, as you will need to provide this information in your tax return.

If you have any outstanding Commonwealth debts, such as HECS-HELP or other government debts, these must also be reported. It’s advisable to seek the guidance of a tax professional to ensure you meet all your tax obligations and take full advantage of the available tax deductions. Properly managing your tax return can maximize the financial benefits of the FHSS Scheme and help you on your path to homeownership.

Study and training support loans considerations

If you have study or training support loans:

• Salary sacrifice contributions to super are reportable employer super contributions
• These contributions are included in your repayment income for study loans
• Consider this impact when planning your FHSS strategy

Getting professional advice

Before using the FHSS Scheme:

• Consider consulting a financial adviser about your specific situation
• Understand how your expected marginal tax rate affects potential benefits
• Compare how much tax you'll save versus conventional saving methods
• Determine if you have any outstanding debts that might affect your release

Getting started with the FHSS Scheme

To begin using the FHSS Scheme:

1. Check your eligibility with the ATO through your myGov account
2. Set up voluntary contributions with your super fund
3. Track your concessional and non-concessional contributions
4. Calculate how your take home pay will be affected if making salary sacrifice contributions
5. Apply for a determination when you're ready for house hunting

The FHSS Scheme can be a powerful tool for first home buyers, offering tax advantages that help you save your house deposit faster by reducing how much tax you pay on your savings.