How to Use the First Home Super Saver Scheme (FHSS) in Australia

The First Home Super Saver (FHSS) scheme allows eligible first home buyers to save for a deposit inside their superannuation fund, where earnings and contributions are taxed at 15% rather than your marginal rate. Here are the key eligibility rules:

• First home buyer requirement: You must not have previously owned or had a relevant ownership interest in real property in Australia (includes residential, commercial, and rural property); does NOT exclude ownership of property overseas
• Age requirement: Must be 18 years old at the time of applying for a FHSS determination
• Australian resident: Must be an Australian resident for tax purposes at the time of application
• Lifetime cap: $50,000 per individual ($100,000 for a couple buying together, each using their own FHSS entitlement)
• Annual contribution limit: You can contribute a maximum of $15,000 per financial year toward the FHSS scheme (this is the amount you can later withdraw - not the total contributions you can make to super)
• Previous use: You cannot use the FHSS if you have previously requested and received a FHSS determination (i.e., withdrawn under the scheme before)
• Intention to live in the property: You must intend to live in the purchased property as soon as practicable and for at least 6 months within the first 12 months of ownership
• The scheme is voluntary: Nothing prevents you from using super without the FHSS for first home buying; the FHSS is specifically for those who want the tax advantage of the super environment on their savings

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The FHSS withdrawal calculation is one of the most confusing aspects of the scheme. Understanding exactly how much you'll receive is critical before committing to the strategy:

• Eligible contributions: Voluntary concessional contributions (salary sacrifice or personal deductible contributions) and voluntary non-concessional contributions (after-tax) made after 1 July 2017
• What does NOT count: Mandatory employer SG contributions; rollovers from another fund; government contributions (co-contributions, spouse contributions made by your spouse)
• Annual withdrawal limit: You can withdraw contributions made in any financial year, up to a maximum of $15,000 per year - not all contributions made in a year are eligible, only up to $15,000/year
• Earnings calculation - deemed return: The ATO applies a deemed rate of return (based on the SG charge shortfall interest charge rate - approximately 9.0% for 2024-25) to calculate notional earnings on your eligible contributions; this is NOT the actual earnings your fund achieved
• FHSS determination: Before withdrawing, you must apply to the ATO for an FHSS determination - this calculates your eligible maximum release amount based on contributions and deemed earnings
• Concessional contributions withdrawal tax: Concessional contributions withdrawn under FHSS are included in your assessable income and taxed at your marginal rate - minus a 30% tax offset; at 32.5%, net tax is 2.5% on the concessional amount; at 37%, net tax is 7%; at 19%, net tax is 0% (the offset exceeds the tax liability, no refund of offset)
• Non-concessional contributions: Non-concessional contributions (after-tax) are withdrawn tax-free; only the deemed earnings on non-concessional contributions are taxed at marginal rate minus 30% offset
• Realistic example: $15,000/year salary sacrificed for 3 years = $45,000 contributions; deemed earnings at 9% = approximately $6,075; total FHSS amount approximately $51,075; tax at 32.5% rate on concessional amount minus 30% offset = 2.5% × $45,000 = $1,125; approximate net FHSS receipt = $49,950

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The FHSS tax advantage comes from two sources - the lower tax rate on earnings inside super and the 30% tax offset on withdrawal of concessional contributions:

• Earnings tax advantage: Money saved inside super earns at 15% tax vs your marginal rate outside super; at 32.5%, this is a 17.5% earnings tax saving; at 37%, a 22% saving on investment earnings
• Contribution tax advantage: Concessional contributions are taxed at 15% when they enter super; if you're in the 37% bracket, you save 22 cents per dollar on the contribution amount; the 30% withdrawal tax offset partially reverses this when you withdraw, but at 37% the net contribution tax cost is (15% in − 7% net withdrawal tax) = 8% effective tax vs 37% if saved outside super
• Savings account comparison (37% bracket, $15,000/year for 3 years):
• Regular savings account: $15,000 in after-tax income invested at 5% HISA, taxed at 37% = 3.15% net return; over 3 years generates $45,000 principal + ~$1,500 net interest = $46,500
• FHSS (concessional): $15,000 salary sacrificed saves $3,300 in income tax (22 cents/dollar); super earns at deemed 9% rate with 15% tax; withdrawal tax 7% net at 37% bracket; net result approximately $49,500-$51,000 - meaningfully more
• The compounding calendar: The longer you contribute before withdrawing, the larger the deemed earnings component and the greater the advantage; contributing for 1 year gives minimal advantage; 3+ years provides meaningful benefit
• Couples strategy: If two people are buying together, each can use their own FHSS up to $50,000 - a couple could potentially access $100,000 combined for their deposit, each with the tax savings in their own bracket

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The FHSS has a specific administrative process that must be followed in the correct order. Getting the sequence wrong can prevent access to the scheme:

• Step 1 - Make eligible contributions: Arrange salary sacrifice through your employer, or make personal concessional contributions and lodge a Notice of Intent to Claim; alternatively make voluntary non-concessional contributions; up to $15,000 per financial year
• Step 2 - Apply for a FHSS determination: When you're ready to purchase (or actively looking), apply to the ATO via myGov for a FHSS determination; this calculates how much you can withdraw; you can request a determination before finding a property
• Step 3 - Request release: After receiving the determination, request the ATO to release the amount from your super fund; you must request the release before signing a contract to buy a property OR within 14 days of signing a contract
• Step 4 - ATO instructs your fund: The ATO instructs your super fund to release the eligible amount; the fund transfers the money to the ATO; the ATO deducts the applicable tax and sends you the net amount
• Step 5 - Purchase the property: You must sign a contract to purchase or construct a home within 12 months of receiving the released funds; if you don't, you can either request a 12-month extension OR recontribute the amount to super as a non-concessional contribution (to avoid a tax penalty)
• Critical timing warning: Do NOT sign a contract before requesting a determination and receiving your funds - the 14-day window is tight; most FHSS advisers recommend getting the determination before starting property inspections
• What to do if the purchase falls through: If the contract falls through after you've received FHSS funds, you have 12 months from the original determination (with possible extension) to find another property; otherwise you must recontribute or pay a flat 20% 'FHSS first home super saver tax'

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The FHSS is valuable for some first home buyers but not for all. A clear-eyed analysis of your situation prevents wasted time and missed opportunities:

• Highest benefit - 37-45% tax bracket: The tax advantage is most powerful for buyers in the 37%+ marginal rate bracket; saving 22-30 cents per dollar on concessional contributions plus the deemed earnings advantage produces a meaningful real benefit over 3+ years
• Moderate benefit - 32.5% bracket: At $45,001-$135,000 income, the concessional contribution saves 17.5 cents/dollar; the 30% offset at withdrawal leaves only 2.5% net tax; still beneficial but less dramatic than at higher brackets
• Minimal benefit - 19% bracket: At $18,201-$45,000, concessional contributions save 4% on tax (19% − 15% = 4%); the 30% offset exceeds the marginal rate - net withdrawal tax is 0% but there is no refund of the excess offset; the deemed earnings advantage remains but is small on modest amounts; low-income first home buyers may be better served by the FHBG or government grants
• Not suitable for immediate purchasers: The FHSS requires at least one financial year of contributions before withdrawal; if you plan to buy within 6 months, there's no time to accumulate meaningful FHSS savings
• Not suitable for self-employed with irregular income: The super contribution timing required for FHSS works best with regular salary sacrifice; sole traders with variable income can still use personal contributions but must carefully monitor the contribution caps
• Combined with other schemes: FHSS can be used alongside the First Home Guarantee (FHBG - 5% deposit, no LMI) and First Home Owner Grants (state-based grants for new constructions); the deposit amount from FHSS counts as 'genuine savings' for lender purposes

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