Key Takeaways
- Save up to $15,000 per year and $50,000 total toward your deposit through super
- Contributions taxed at 15% instead of your marginal rate (up to 47%)
- Earnings on contributions accrue at a deemed rate set by the ATO
- Can be combined with First Home Guarantee and other schemes
- Must be a first home buyer who has never owned property in Australia
- Allow 4-6 weeks for the withdrawal process before settlement
The First Home Super Saver (FHSS) scheme allows first home buyers to save for their deposit inside superannuation, where contributions are taxed at just 15% instead of your marginal tax rate. For many buyers, this means thousands of dollars in tax savings that effectively boost your deposit.
Despite the significant benefits, the FHSS scheme remains underutilised. Many first home buyers either don't know about it or find the process confusing. This guide explains how the scheme works, who's eligible, and how to maximise the benefits while avoiding common pitfalls.
At Mortgage & Finance Advisory, we help first home buyers understand and coordinate all available assistance, including the FHSS scheme, First Home Guarantee, and state-based grants and concessions.
How the FHSS Scheme Works
The FHSS scheme lets you make voluntary contributions to your superannuation fund specifically for the purpose of saving a home deposit. These contributions receive favourable tax treatment, and when you're ready to buy, you apply to the ATO to release the funds.
Contribution Limits
You can contribute up to $15,000 in any single financial year and $50,000 in total across all years. For a couple where both partners use the scheme, that's potentially $100,000 toward your combined deposit. Contributions can be made through salary sacrifice (before-tax deductions from your pay) or personal contributions that you claim as a tax deduction.
Tax Benefits Explained
The key benefit is the tax treatment. Salary sacrifice contributions (and personal contributions you claim a deduction for) are taxed at 15% when they enter super. Compare this to your marginal tax rate, which might be 32.5%, 37%, or even 45% depending on your income.
| Taxable Income | Marginal Rate | Super Rate | Tax Saving per $15,000 |
|---|---|---|---|
| $45,001 – $135,000 | 32.5% | 15% | $2,625 |
| $135,001 – $190,000 | 37% | 15% | $3,300 |
| $190,001+ | 45% | 15% | $4,500 |
Someone earning $90,000 who contributes the maximum $15,000 in a year saves approximately $2,625 in tax compared to saving the same amount outside super. Over three years of maximum contributions, that's nearly $8,000 extra toward your deposit.
Important: Your FHSS contributions count toward your overall super contribution caps. The concessional (before-tax) cap is $30,000 per year, which includes employer contributions. Ensure your total contributions don't exceed this limit.
Eligibility Requirements
To use the FHSS scheme, you must meet several criteria. You must be 18 or older, have never owned property in Australia (including investment property), have not previously requested an FHSS release, and intend to live in the property you purchase for at least six months within the first year of ownership.
The property ownership requirement means you can't have owned any property in Australia, even if you never lived in it. However, if you've owned property overseas but never in Australia, you may still be eligible. The requirement relates specifically to Australian property ownership.
Making FHSS Contributions
Salary Sacrifice Method
The most common approach is arranging salary sacrifice through your employer. You request that a portion of your pre-tax salary be directed to your super fund as additional contributions. These contributions are automatically taxed at 15% by your super fund.
To set this up, speak with your payroll department or HR team. You'll need to nominate an amount per pay period. Remember to stay within the $15,000 annual FHSS limit and overall $30,000 concessional contribution cap.
Personal Contributions Method
Alternatively, you can make personal contributions directly to your super fund and then claim a tax deduction when you lodge your tax return. You'll need to complete a "Notice of intent to claim a deduction" form and submit it to your super fund before requesting FHSS release or lodging your tax return.
This method offers more flexibility but requires more administrative steps. It suits people who receive irregular income, bonuses, or who want to make lump sum contributions at certain times of the year.
Withdrawing Your FHSS Funds
When you're ready to purchase, you need to request release of your FHSS funds from the ATO. This process takes several weeks, so it's essential to start early.
Request a Determination
Apply to the ATO through myGov to find out your maximum FHSS release amount. This includes your contributions plus deemed earnings. Allow 10-20 business days.
Request Release
Once you have your determination, apply to have the funds released. You can request all or part of the available amount.
Receive Your Funds
Your super fund pays the ATO, who then pays you directly. This typically takes 10-15 business days after your request.
Purchase Property
You must sign a contract to purchase within 12 months of requesting release. Extensions are available in some circumstances.
Timing Is Critical
The FHSS withdrawal process takes 4-6 weeks minimum. Don't wait until you've found a property to start the process. Request your determination early so funds are ready when you need them for your deposit.
How Released Funds Are Taxed
When you withdraw your FHSS savings, the amount is added to your assessable income for the year, but you receive a 30% tax offset. This means you effectively pay tax at your marginal rate minus 30 percentage points, with a minimum of zero.
For most first home buyers in typical income brackets, this results in minimal or zero additional tax on the withdrawal. However, if you have a very high income, some tax may apply on the released amount.
Combining FHSS with Other Schemes
The FHSS scheme can be used alongside other first home buyer assistance, potentially maximising the support you receive.
First Home Guarantee
Use FHSS to save your 5% deposit with tax benefits, then use the First Home Guarantee to purchase without paying Lenders Mortgage Insurance. This combination gets you into the market faster with less cash required.
First Home Owner Grant
If you're buying or building a new home in Victoria, you may also be eligible for the $10,000 First Home Owner Grant. This is separate from FHSS and adds to your available funds.
Stamp Duty Concessions
First home buyers in Victoria receive stamp duty exemptions (for properties up to $600,000) or concessions (up to $750,000). These savings don't interact with FHSS but add to your overall benefit as a first home buyer.
Real Client Outcome
A couple both earning around $85,000 each contributed $15,000 per year to FHSS for two years, accumulating approximately $62,000 including deemed earnings. They saved over $10,000 in tax compared to saving outside super. Combined with First Home Guarantee, they purchased a $650,000 property with just the FHSS funds as their deposit, avoiding LMI entirely.
Common FHSS Mistakes to Avoid
Starting the Release Process Too Late
The biggest mistake is waiting until you've found a property to begin the withdrawal process. With 4-6 weeks required, you may miss out on a property or face settlement delays. Start the process as soon as you're seriously looking.
Exceeding Contribution Caps
Remember that FHSS contributions count toward your total concessional contribution cap ($30,000). If your employer contributes $12,000 in super guarantee and you salary sacrifice $15,000 for FHSS, you've used $27,000 of your cap. Exceeding the cap results in penalty tax.
Not Submitting the Notice of Intent
If making personal contributions, you must submit a "Notice of intent to claim a deduction" to your super fund before requesting FHSS release. Without this, your contributions may not be eligible for release or you may miss the tax deduction.
Frequently Asked Questions
You can contribute up to $15,000 per financial year and $50,000 in total. For a couple both using FHSS, that's up to $100,000 combined toward your deposit.
Salary sacrifice contributions are taxed at 15% in super instead of your marginal rate (up to 47%). For someone on $90,000, this could mean paying 15% instead of 34.5%, saving thousands over the contribution period.
After requesting a determination from the ATO, allow 10-20 business days to receive it. Once you request release, funds are typically paid within 10-15 business days. Total process is usually 4-6 weeks.
Yes, these schemes can be combined. You can use FHSS to build your 5% deposit, then access the First Home Guarantee to avoid LMI. This combination maximises available support.
You must sign a contract within 12 months of requesting release (extensions available). If you don't purchase, you can recontribute the funds to super or pay FHSS tax on the amount. Notify the ATO if your plans change.
Ready to Maximise Your Deposit?
Get expert guidance on using FHSS alongside other first home buyer assistance.
