Typically, government assistance in buying a home tends to focus on bolstering deposits, which makes sense considering scraping together the needed savings is often the biggest hurdle first home buyers face.

The national median property price was $786,000 in May 2024, as per CoreLogic data. To buy a property with a 20% deposit at that price, a buyer would need to save at least $157,200.

Of course, a buyer doesn’t necessarily need a 20% deposit. Though, that is often the deposit required to avoid paying Lenders Mortgage Insurance (LMI) premiums.

While things like the First Home Guarantee are designed to help you buy a home with a smaller deposit, the First Home Super Saver Scheme helps you grow your own deposit, and can save you tax in the meantime.

It allows you to withdraw your voluntary superannuation contributions in order to buy your first home. Here’s how it works.

What is the First Home Super Saver Scheme?

The First Home Super Saver (FHSS) allows first home buyers to save their deposit inside their super fund.

Ordinarily, superannuation contributions cannot be withdrawn until a person reaches ‘preservation age’ – generally 60 years old.

Under the FHSS, though, Aussies who have never owned property before can withdraw some or all of the voluntary contributions they’ve made when they wish to buy their first home.

Right now, you can withdraw up to $15,000 of your super contributions made within any one financial year, up to a maximum of $50,000 in total, plus any associated earnings.

Investment income from super funds is generally taxed at 15%.

It's important to note if you're using the FHSS that you can’t withdraw funds an employer has put into their super fund, only any extra funds that have been deposited. You also can’t withdraw superannuation contributions made before July 2017.

Couples, siblings, or friends buying property together can each access their own eligible FHSS contributions. Even if your co-buyer has previously owned property, you might be able to use the FHSS if you’re eligible.

FHSS: The benefits

There are a couple of reasons saving for a house deposit inside a superfund can be beneficial.

Firstly, super contributions are normally taxed at a rate of 15%, which means you can likely keep hold of more of your money by depositing it into your super. Let’s use an example.

Consider someone who earns $100,000 per year, before tax. Their top marginal tax rate for financial year 2024-25 is 30% (30 cents for each $1 earned over $45,000).

They might approach their employer and agree to salary sacrifice $10,000 a year into their super, meaning there will be $10,000 less in their take-home pay-packet that year.

That $10,000 contribution is taxed at 15%, meaning $8,500 of it ends up in their super account and $1,500 goes to tax.

Had those funds been simply paid to the employee, the ATO would have demanded $3,000 of tax on them, leaving only $7,000. Our fictional worker just paid $1,500 less tax than they otherwise would have and can use those funds to buy their first home down the road.

Will you be taxed when making a FHSS withdrawal?

Getting further into the weeds, there is also a 30% FHSS tax offset available on what you withdraw under the scheme.

Tax on super withdrawals is a complicated matter, with lots of different scenarios that determine whether you pay tax when withdrawing from your super and at what rate.

When making FHSS withdrawals though, whatever tax is due is offset by 30%.

For example, let’s say you’re withdrawing $10,000 as a lump sum. Ordinarily, this would see tax withheld at your marginal tax rate, say 30%, plus a 2% Medicare Levy. But, with the tax offset, just 2% of this would be kept back.

If the ATO can’t determine your marginal tax rate, the funds withdrawn will be taxed at a rate of 17%.

How to apply for the FHSS

Of course, before you access the FHSS, you need to have been depositing extra funds into your super account.

It’s also worth checking in with your superfund before you begin making voluntary superannuation contributions, as there’s a chance it could refuse to release the funds when you go to buy.

Bear in mind that you can only withdraw $15,000 of deposits from any one financial year, up to a total of $50,000. So, if you deposited $45,000 in a single year, you’ll only be able to withdraw $15,000, but if you deposited $15,000 every year for three years, you’ll be able to withdraw $45,000, plus associated earnings.

Here are the steps to apply for a release under FHSS:

  1. Request an FHSS determination
    Make sure you apply for this before signing any property contract. At this point, you’ll find out the maximum amount you can withdraw.

  2. Make a FHSS release request
    This step can be done before signing a property contract or within two weeks of doing so. If you make a request after that period, even if it’s valid, you’ll need to pay FHSS tax (a flat rate of 20% of the amount released). Make sure all information you provide is accurate, including your contributions, tax deductions, and the total amount you are claiming.

  3. Notify the ATO
    After you sign a contract to purchase or construct a home, you have 28 days in which to notify the ATO through myGov. You’ll be required to disclose the date you signed the contract as well as the address of the property. If you fail to notify the ATO, you’ll need to pay FHSS tax.

  4. Sit back and wait
    It generally takes 15 to 20 business days for your super fund to release the money and for it to be paid to your nominated bank account.

Who is eligible for the FHSS scheme?

If you are looking to take advantage of the scheme, there are a few eligibility requirements:

  • You must be at least 18 years old to request an FHSS determination or a release of amounts under the FHSS. However, you can start making eligible contributions before you turn 18 years old.

  • You must not have owned any property in Australia before applying for the scheme. This includes ownership of land and investment or commercial property.

  • You can’t have already applied to release money under the FHSS scheme. Though, changes implemented in late 2024 will allow those who apply for a release and later withdraw their application to apply again in the future.

  • You must live in the property you end up buying for at least six of the first twelve months, and move in as soon as practical.

  • You can’t use the FHSS scheme to purchase vacant land, but you can use it for the construction of a home on vacant land as long as you didn’t purchase the land before applying for an FHSS determination. The contract to construct the home must be entered into within 12 months from the date you requested an FHSS release.

Are you qualified for financial hardship provision?

Even if you previously owned a property, you could be eligible for the scheme if the ATO determines you experienced a financial hardship resulting in you losing ownership of said property.

This can help a person financially recover from circumstances such as bankruptcy, divorce, loss of employment, illness, and natural disaster.

You can apply for financial hardship provision through myGov. If the ATO determines you've suffered a suitable hardship, you must also meet the following requirements at the time you lodge your FHSS scheme determination form:

  • You must not have acquired subsequent interest in real property from the time you lost your initial property due to a financial hardship event.

  • You must be at least 18 years old.

  • You must not have previously made an FHSS release request.

FHSS contributions

FHSS contributions can be made as a lump sum or in smaller, partial amounts. There are two main types of contributions eligible to be withdrawn under the FHSS Scheme:

Concessional contributions

Concessional contributions are basically anything that you haven’t already paid tax on. This includes salary sacrificing or after tax contributions that you're going to claim a tax deduction for.

Concessional contributions are taxed at 15%.

Non concessional contributions

As you can probably figure out, non-concessional contributions are amounts you have already paid tax on. If you make a contribution from your after tax salary, and do not claim a tax deduction, this is a non concessional contribution, since you will be taxed at your marginal rate.

These contributions are not taxed

How much super can you withdraw for a property deposit?

The total amount you can access under the FHSS is limited to $15,000 of your contributions in any one financial year, up to a total of $50,000, as well as any associated earnings.

Up to these limits, you can withdraw 100% of your eligible non concessional contributions. However, you can only withdraw up to 85% of your concessional contributions.

When you make an FHSS withdrawal, tax is withheld based on your marginal tax rate plus the Medicare Levy, minus the 30% offset.

Frequently Asked Questions

What if I am not able to buy a property within 12 months of requesting for a withdrawal?

The ATO will automatically provide a written notice of extension spanning 12 months for you to sign a property contract.

The maximum time you have to sign a property contract of recontribute your super fund is 24 months from the date you requested to withdraw the FHSS amount.

Will I be able to use other government schemes with FHSS?

Your eligibility for FHSS will not be affected if you use other state or federal purchasing schemes.

This means you might be able to use the FHSS in conjunction with the First Home Guarantee or a first home owner grant offered by your state or territory.

How can I notify the ATO when I sign a property contract after applying for FHSS?

You can notify the ATO of a property purchase through myGov. Once you’ve signed the contract of sale, you’ll need to get in touch with the ATO within 28 days.

This article was originally written on 27 September 2020 and updated on 25 June 2024

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