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First Home Super Saver Scheme

Looking to boost your savings for your first home? The First Home Super Saver scheme may be the answer!

No obligation. It won't affect your credit score.

Written by , updated on September 21st, 2023

The Australian Government’s First Home Super Saver (FHSS) scheme has been implemented to support Australians looking to purchase their first home. How can the scheme better your first-home deposit savings? Here we talk you through the process and explain the ins and outs of the FHSS scheme.

Why should I use the First Home Super Saver scheme?

The FHSS scheme was implemented by the Australian Government to assist Australians in increasing their savings for their first home. The catch? You must build a savings deposit in your superannuation fund.

The FHSS scheme only applies to salary sacrifice or voluntary personal contribution arrangements to your super fund and deemed earnings from your super fund. These funds can then be withdrawn to enable you to put down a home loan deposit.

The main reason for using the FHSS scheme comes down to tax savings.

By choosing to make concessional contributions, through either a salary sacrifice arrangement or personal contributions, you will be avoiding your marginal tax rate and instead be rewarded with a tax rate of 15%. Therefore, by opting to sacrifice some of your weekly, fortnightly or monthly pay, you will be saving a significant amount of money and getting yourself closer to that coveted first home.

Once you decide it is time to withdraw your funds and the associated earnings, you will also be subject to a withdrawal tax rate but with immense tax benefits. This rate will be your marginal tax rate, plus a Medicare levy of 2%, but also be benefited by a tax rebate of 30%.

FHSS scheme transaction	Tax rate
Voluntary concessional contributions (salary sacrifice and personal contributions) to super through FHSS scheme	Incur tax rate of 15%.
Withdrawal of FHSS scheme funds	Taxed at your marginal tax rate, plus a Medicare levy of 2%, minus a FHSS scheme tax rebate of 30%.

Who is eligible for the FHSS scheme?

In order to participate in the FHSS scheme, you must meet the following standard criteria:

Be 18+ years old.
Have never used the FHSS scheme before.
Must be purchasing your first home having never owned real property in Australia.

However, there are exceptions to the home ownership in Australia rule under a ‘financial hardships provision’. If you have previously owned a property but lost ownership because of divorce, natural disaster, bankruptcy, illness or loss of employment, you may still be eligible. In this instance, you will need to complete a FHSS scheme hardship application form online through myGov and the ATO’s linked services.

In addition, it is possible to begin making voluntary contributions to your super at any stage. However, you do need to be 18+ years old in order to request a release or determination of the amounts you hold under the FHSS scheme.

Important things to know about the First Home Super Saver Scheme

When planning to use the FHSS scheme, there are a number of important things you should be aware of:

You need to apply for and have received your FHSS determination form from the ATO prior to signing any contract for your first home or applying to release your held FHSS amounts.
It is vital to correctly enter every one of your eligible contributions to your super into the FHSS determination form.
Standard superannuation guaranteed contributions from your employer cannot be released under the FHSS scheme.
If you are to fill out incorrect information on your FHSS determination form and proceed to request a release of funds based on the wrong information, your request will be cancelled, and your funds will return to your nominated super fund.
It is possible to request a release of funds with the FHSS scheme on one occasion.
The home you choose to purchase or build must be in Australia.
If you have already applied for and received a valid determination form and signed your contract on your first home, you will have to make a valid release request within 14 days of entering that home loan contract.
Once you have requested the release of your funds under the FHSS scheme, it may take anywhere from 15 to 25 days to have access to those funds.

How do I proceed with the First Home Super Saver Scheme?

Consider your financial situation and ability to sacrifice your income

Break down your financial situation and figure out if you can afford to sacrifice money to contribute to your FHSS scheme savings. If you’re already struggling to afford bills and other expenses, then forgoing more of your income to make extra contributions to your super may do more harm than good. On the contrary, if you work out that you can afford to forgo some of your income and make those extra contributions to your savings under the FHSS scheme, then you should proceed and take advantage of the added savings benefits.

Decide on a salary sacrifice or voluntary personal contributions arrangement

Weigh up whether you want to organise a salary sacrifice arrangement with your employer or make personal super contributions of your own. Be aware that not all employers will offer a salary sacrifice arrangement.

Prior to saving under the FHSS scheme, you will also need to:

Ensure your chosen super fund will release the money.
Enquire with your chosen fund about any charges and insurance implications you may incur.

It is important to note that contributions made into defined benefit interest or constitutionally protected funds are not eligible for the FHSS scheme.

Have your eye on a house? Begin the process of withdrawing FHSS scheme savings

Once you have a property in your sights and you wish to withdraw your FHSS scheme savings, begin the process of releasing your funds by getting in contact with the ATO.

First you will need to request and complete a FHSS determination form which is available on the myGov website and linked to ATO’s online services. Following this, the ATO will inform you of the maximum amount you may withdraw under the FHSS scheme. You will then need to proceed to make a formal request to release your FHSS savings from your super. You must begin this process as early as possible once you have the required savings and/or find your home as it can take up to 25 business days to process the transferring of funds and lenders might not be flexible.

You may sign the purchase contract for a property or to construct your home from the exact date you officially complete a valid request to release your FHSS savings. However, it is also possible to sign your contract to purchase a property or construct your house prior to a successful request to release FHSS savings if:

You have completed FHSS determination form prior to signing.
You will have to make a valid request to release FHSS funds within 14 days of signing the contract.

From the date that you request the release of funds, it will take 15-25 days for the savings – with the ATO withholding your tax owed – to be deposited to your chosen account.

Pros and cons of the First Home Super Saver Scheme

PROS

Save money in taxes

By taking part in the FHSS scheme you will be able to save thousands of dollars in taxes.

Grace period to purchase home

Following the withdrawal of your funds, you have up to 12 months or even 24 months (upon request) to purchase your first home.

Withdrawal amount is secure

The amount you opt to withdraw is not impacted by a fall in the markets.

Own your first home faster

The ultimate benefit in using the FHSS scheme is that you will be able to own your first home faster than traditional methods of saving for a first home.

CONS

Less cash on hand

If you opt for salary sacrifice, you will have less cash on hand for other financial needs.

FHSS scheme is constantly changing

The FHSS scheme is ever-changing and doesn’t necessarily have a long-term future. Changes could occur year by year.

FHSS scheme contributions restricted

Returns on your contributions are restricted to the ‘shortfall interest charge’ rate which changes year by year.

Common questions about the First Home Super Saver scheme

What type of home can I buy under the FHSS scheme?

When withdrawing your savings from super to purchase a home, you must buy a ‘residential premises’. This property can include vacant land, however, cannot include a property which is unable to be occupied as your residence. In addition, once the property is purchased or constructed, you must occupy the property for a minimum of 6 months in the year following purchase and not use it as an investment property.

How do I make my contributions towards my FHSS scheme balance?

Voluntary contributions which are made towards your superannuation are eligible to count towards your FHSS scheme balance. It is possible to organise a salary sacrifice setup with your employer or make personal contributions directly to your super fund yourself.

How much can I contribute to my FHSS scheme savings?

It is possible to contribute up to $15,000 a year or $30,000 in total with the FHSS scheme.

Will my contributions grow under the FHSS scheme?

When it comes time to withdrawal, you can withdraw a judged rate of earnings in addition to your contributions. This specific rate is that of the ‘shortfall interest charge’ and can change yearly but ranges around approx. 4.5-5%.

Are my contributions taxed?

Salary sacrifice contributions are taxed at a rate of 15 percent in the super fund. Personal contributions which are made after tax will not be taxed.

How will my FHSS scheme savings be released?

In order to release your FHSS scheme savings, you need to get in contact with the ATO who will inform you of the maximum amount you can release under the FHSS scheme. These withdrawals will typically be taxed at your specific marginal tax rate minus a 30-percent rebate. The ATO will then organise the release of your money from your super fund which will then be paid on to your chosen bank account. The ATO will be responsible for withholding your tax owed on the amount withdrawn.

What happens if I don’t end up buying a home after my FHSS scheme time expires?

After your release of FHSS scheme funds from your super, you will have a period in which to purchase a home. If following this period you are yet to purchase a home, you will have the option to personally contribute the released amount into your superannuation account or pay 20 percent tax on the concessional amount which was released. This tax will remove the benefit received from utilising the FHSS scheme.