First Home Super Saver Scheme

If you’re making plans to buy your first home, you may be eligible to use your super to help pay your deposit. This is known as the First Home Super Saver (FHSS) Scheme. Here’s everything you need to know about the FHSS Scheme and how it can help you as a first time home buyer…

What is the First Home Super Saver Scheme?

If you’ve ever wondered: Can I withdraw my own super contributions? The answer is yes, under the guidelines of the First Home Super Saver scheme.

The First Home Super Saver (FHSS) Scheme lets first time home buyers make contributions to their super, then withdraw those contributions to put towards a deposit either to build or buy a home. For first time home buyers, this scheme can make it easier to buy a home.

Though it’s important to note that there are certain rules and requirements for who is eligible for this scheme and when the money can be withdrawn.

How does the FHSS Scheme Work?

The FHSS Scheme uses Australia’s superannuation system as a tax-effective way to save for a deposit on a home. So how does the First Home Super Saver Scheme work? Here’s a step by step:

1. Individuals make voluntary contributions to their super – either before or after tax. For the FHSS Scheme, individuals can contribute up to $15,000 to their super per financial year.

2. When the individual is ready to buy their first home, they can apply for an FHSS determination with the Australian Taxation Office (ATO). The application can be filled out via myGov.

3. Once the application is submitted, the ATO will let the individual know how much they are eligible to withdraw and the tax applicable.

4. Once the determination is made, another application needs to be made to the ATO in order for the savings to be released. This is known as a ‘request for release’. From here, the ATO will then instruct the super fund to release the eligible amount of money. The ATO will deduct any applicable tax and release the remaining money to the individual. This can take anywhere from 15-25 days.

5. Once the money is received, the home buyer will have 12 months from the date that the ‘request for release’ was sent to either buy or build their first home.

How Can I Use the FHSS Scheme to Buy My First Home?

The FHSS Scheme is a way to help first time home buyers save up more quickly for a deposit on a home. This is due to the super’s generally favourable tax benefits.

The money you receive from your super via the FHSS Scheme will go towards your deposit that is required to secure a home loan in order to buy your first home.

It’s important to note that the money you save through the scheme might not be enough for the entire deposit on your home, but it could be combined with other money saved to help get you to the total needed faster.

Regardless, here are the requirements for using the FHSS Scheme to buy your first home:

• You must be a first time home buyer.

• Only residential premises may be purchased with this deposit – whether it’s vacant land eligible for residential building or a residential home. Premises that would not be eligible include a houseboat or a motorhome.

• You have until 12 months from withdrawal to buy or build your home, though you can ask the ATO for another 12 months extension if required and you’re deemed eligible.

• The first-home buyer must live at the property for at least six months of that first 12-month period from when the home became occupied.

Who is Eligible for the FHSS Scheme?

In order to request a FHSS determination or a release of amounts under the FHSS scheme, you must be at least 18 years of age. Though it’s also important to note that individuals who are younger than 18 years of age may still make eligible contributions.

Other requirements include having never owned any Australian property. This includes any vacant land, a lease of land in Australia, investment property, commercial property or a company title interest in land in Australia.

Additionally, anyone who has ever previously made a FHSS release request under the FHSS scheme is not eligible.

Is the Super Saver Scheme Worth It?

When determining whether the super saver scheme is the right choice for you, it’s important to note the requirements for voluntary super contributions and withdrawals. According to the ATO, you can apply to have a maximum of $15,000 of your voluntary contributions one financial year included in the eligible contributions to be released under the FHSS scheme and up to a max total of $50,000 (as of 1 July 2022) in contributions from total years.

Additionally, the types of contributions you make determine how much you are eligible to withdraw. You can withdraw:

• Up to 85% of eligible before-tax contributions

• Up to 100% of eligible after-tax contributions

• Up to 100% of the deemed earnings

Looking at these numbers, it can certainly be worth it for a lot of first time homebuyers. Especially when we look at the benefits of the FHSS Scheme.

Benefits of the First Home Super Saver Scheme

So, what is the benefit of the first home super saver scheme? As mentioned earlier, the FHSS Scheme is appealing to many first time home buyers because of its favourable tax treatment. First time home buyers can potentially see some tax savings. This is certainly the main benefit of the first home super saver scheme.

So how does this work? When you save with your super fund, you can take advantage of the favourable tax treatment that applies to super savings. Let’s take a look at how those savings are taxed.

How are Savings Taxed in the First Home Super Saver Scheme?

According to the ATO, voluntary concessional contributions tend to be taxed at 15%. While voluntary non-concessional contributions aren’t taxed at all in your super fund. Investments outside of the super can be taxed anywhere up to 45%, so this certainly makes a very large difference. Any concessional contributions will be taxed once they are withdrawn by you from your super.

How to Apply for the Scheme

Before applying, you’re going to want to check the balance of your super fund(s) at any time to see how much you have saved. This will give you a better idea of how much can be released. Once you’re ready, you can begin the FHSS Scheme application process.

To apply for the first home super saver scheme you’ll need to login to or create an account at MyGov.com. Next, go into the Super drop-down menu, select Manage, then select First home saver. Here you can apply for your determination.

Things to Keep in Mind When Using the FHSS Scheme

Here are some important things to note about the first home super saver scheme:

• Your super funds under the FHSS scheme can only be accessed once, even if the maximum amount wasn’t withdrawn the first time.

• Withdrawing super for a home deposit could impact any retirement savings you have in your super fund.

• You may not use your employer's super contributions or your spouse contributions towards your deposit.

• The contributions you make to super count towards your concessional or non-concessional contributions cap. Be careful not to exceed your caps. This could result in a penalty tax amount that you would have to pay.

• Any investment earnings on your FHSS amount aren’t based on the actual performance of your super fund, rather they are deemed by the ATO.

• When the ATO sends you your super saver money, tax is charged on your deemed earnings and before-tax contributions.

• You have to include the FHSS amounts you received from the ATO as income when filling out your yearly tax return.

Final Thoughts

The bottom line is that the FHSS Scheme can be an excellent option for first time Australian home buyers looking to save up money for a deposit on a home. As with any important financial decision, be sure to do thorough research on what using the FHSS Scheme could look like for you. If you need more information and you want an expert’s advice, book a call with us now!