First Home Super Saver Scheme (FHSSS): Your Complete Guide to Buying Your First Home Faster

For many young Australians, saving for a home deposit feels like an impossible dream in today's property market. The First Home Super Saver Scheme (FHSSS) offers a powerful solution by allowing you to save for your deposit inside the tax-advantaged superannuation environment. This comprehensive guide explains everything you need to know about using the FHSSS to accelerate your path to home ownership while keeping more of your hard-earned money.

What is the First Home Super Saver Scheme?

The First Home Super Saver Scheme is a government initiative introduced in 2017 to help first home buyers save for a deposit faster. The scheme allows eligible Australians to make voluntary contributions into their superannuation fund and later withdraw these contributions, along with associated earnings, to put towards their first home purchase. The key advantage is that contributions made under the scheme benefit from the concessional tax treatment of superannuation, meaning you pay less tax on your savings compared to keeping money in a standard savings account.

Under the current rules, you can contribute up to $15,000 per financial year and a total maximum of $50,000 across all years. These limits apply to voluntary contributions made from 1 July 2017 onwards. When you withdraw these funds, concessional contributions are taxed at your marginal rate less a 30 per cent offset, which is typically much lower than the tax you would have paid on those earnings outside super. This tax advantage can boost your deposit savings by thousands of dollars compared to traditional saving methods.

Eligibility Requirements for the FHSSS

To use the First Home Super Saver Scheme, you must meet several eligibility criteria at the time you request a release of funds. Firstly, you must be 18 years or older when you request the determination of your maximum releasable amount. You must never have owned property in Australia before, whether as an investment, holiday home, or primary residence. This includes properties owned through a company or trust in which you had a controlling interest.

Additionally, you cannot have previously requested a release under the scheme, as it is strictly a one-time opportunity per person. You must also genuinely intend to occupy the property you purchase as your home as soon as practicable and for at least six months within the first twelve months of ownership. Couples purchasing together can each access the scheme individually, potentially doubling the available deposit funds. It is crucial to verify your eligibility before making contributions, as incorrectly claiming the scheme can result in penalties.

How to Make Contributions Under the Scheme

There are two types of contributions you can make under the FHSSS: concessional and non-concessional contributions. Concessional contributions include salary sacrifice arrangements and personal contributions for which you claim a tax deduction. These contributions are taxed at 15 per cent when they enter your super fund, which is typically much lower than your marginal tax rate. Non-concessional contributions are made from after-tax income and receive no tax benefit on the way in, but the earnings on these amounts grow tax-free within super.

For maximum benefit, most first home buyers should focus on concessional contributions through salary sacrifice. Speak with your employer's payroll department to set up regular salary sacrifice contributions directly into your super fund. Alternatively, you can make personal contributions from your bank account and claim a tax deduction when you lodge your tax return. Remember to stay within both the FHSSS limits and your overall concessional contribution cap of $30,000 per year, which includes your employer's Super Guarantee contributions.

The Withdrawal Process Explained

When you are ready to purchase your first home, the withdrawal process involves several steps with strict timeframes. First, you must apply to the Australian Taxation Office for a determination of your maximum releasable amount. The ATO will calculate how much you can withdraw based on your eligible contributions and associated deemed earnings. This determination is valid for 14 days, during which you can view the amount without committing to release the funds.

If you decide to proceed, you request the ATO to issue a release authority to your super fund. Your fund then has up to 25 business days to release the funds to the ATO, which will subsequently send the money to you after withholding the appropriate tax. Once you receive the funds, you have 12 months to sign a contract to purchase or construct your first home. If you do not purchase within this timeframe, you can apply for a 12-month extension. Failing to purchase means you must either recontribute the funds to super or pay an FHSSS tax of 20 per cent on the assessable released amount. Use our superannuation calculator to understand how temporary withdrawals might affect your long-term retirement balance.

Tax Advantages and Potential Savings

The tax benefits of the FHSSS can be substantial, particularly for middle and higher income earners. Consider an example where someone earning $90,000 per year salary sacrifices $15,000 into super under the scheme. Without salary sacrifice, they would pay tax at 34.5 per cent on this amount, leaving them with $9,825 after tax. Through the FHSSS, the $15,000 is only taxed at 15 per cent when entering super, meaning $12,750 is added to their balance. This represents a saving of $2,925 in a single year.

Over three years of maximum contributions at $15,000 per year, plus deemed earnings calculated at the shortfall interest charge rate, you could accumulate over $50,000 towards your deposit. The exact savings depend on your income level, marginal tax rate, and how long you save before purchasing. Higher income earners paying the 37 per cent or 45 per cent marginal rates will see even greater tax advantages. It is also worth noting that the deemed earnings rate has historically been quite competitive compared to savings account interest rates, adding another layer of benefit to using the scheme.

Common Mistakes and How to Avoid Them

Several common errors can derail your FHSSS strategy or reduce your benefits. One frequent mistake is exceeding the annual or total contribution limits, which can result in contributions not being eligible for release under the scheme. Always track your contributions carefully and remember that the $15,000 annual limit and $50,000 total limit apply specifically to FHSSS-eligible voluntary contributions made since 1 July 2017, not your overall super contributions.

Another pitfall is not understanding the timing requirements. You must request your FHSSS amount determination before signing a contract to purchase your home, not after. Signing a contract first makes you ineligible for the scheme. Similarly, some buyers forget that the 12-month purchase requirement begins when you receive the released funds, not when you request the release. Plan your property search and application timing carefully to avoid running out of time. Finally, ensure you have genuinely never owned property in Australia, as the ATO conducts checks and will reclaim released amounts plus penalties if you were not truly eligible.

Conclusion

The First Home Super Saver Scheme represents one of the most powerful tools available to Australian first home buyers, offering significant tax advantages that can boost your deposit by thousands of dollars compared to traditional saving methods. By understanding the eligibility requirements, contribution limits, and withdrawal process, you can strategically use the scheme to accelerate your journey to home ownership.

While the FHSSS temporarily redirects money from your retirement savings to your home deposit, property ownership itself is a valuable long-term asset. After purchasing your home, you can resume building your superannuation balance with the knowledge that you have already secured one of the most important financial assets for your future. If you are considering using the FHSSS, consult with a financial advisor to ensure the scheme aligns with your overall financial goals.