Make voluntary contributions to your super.
Saving a deposit to buy your first home isn’t easy. That’s why the government introduced the First Home Super Saver Scheme (FHSSS) to help Australians use the tax benefits of super to save a deposit faster.
Essentially, you make extra contributions to your super and allow your money to grow. When you’re ready, you can withdraw this money, including the associated earnings, to put towards a deposit on your first home.
According to the ATO, more than $415 million has been saved and accessed using the FHSSS since it was introduced in 2018.
Of course, there are many different ways to save a first home deposit. The benefit of doing it within your super is that you may end up paying less tax, which means you can save a deposit faster.
You can actually save on tax in two ways.
Firstly, you only pay of up to 15% tax on whatever earnings your super contributions make. Outside of super, in another type of investment account, you would have to pay your marginal tax rate on those earnings.
Secondly, if you make before-tax super contributions (such as salary sacrifice contributions), you’ll only have to pay 15% on those contributions as well – and you’ll reduce your taxable income by the total amount of your contributions.
The higher your marginal tax rate, the more you can potentially save.
You can take as long as you want to save a first home deposit with the FHSSS. When you’re ready, you can withdraw up to $15,000 of the contributions you made each financial year with a maximum total withdrawal amount of $50,000 plus associated earnings.
If you’re buying a home with your partner, they can use the FHSSS as well. That means you could potentially withdraw up to $100,000 plus associated earnings to put towards your first home.
• Salary sacrifice contributions (arranged through your employer and paid from your before-tax income)
• Personal contributions that you claim a tax deduction for
• Personal contributions that you don’t claim a tax deduction for
• Super guarantee contributions (the ones your employer makes for you)
• Spouse contributions that your partner pays into your super account
Make voluntary contributions to your super.
When you think you have enough money saved, apply to the ATO for what’s known as a FHSSS determination. You can do this through your myGov account. If your application is approved, the ATO will let you know your maximum FHSSS release amount.
Send a withdrawal request to the ATO by submitting a release form through myGov. The ATO will assess the form and get in touch with your super fund to let them know about the withdrawal. Once the super fund pays the amount to the ATO, the ATO will withhold a certain amount of tax and pay the rest into your bank account. This is usually done within 15-20 business days.
Put the money towards your home deposit. You have 12 months to buy a property or enter a contract to build a home from the date you request a FHSSS release. You only have to sign the contract within those 12 months – you don’t have to be in the property already. However, the ATO may grant you an extension for another 12 months if you can’t find what you’re looking for.
Within 28 days of signing the property contract, use myGov to let the ATO know you’ve bought a property. If you skip this step, you may have to pay additional tax.
While the FHSSS is intended for first home buyers, there’s an exception for people who have experienced financial hardship that resulted in them losing a property they owned.
This might be due to:
The best way to find out if you’re eligible for the FHSSS financial hardship provision is to contact the ATO directly. You’ll have to provide evidence as part of your FHSSS application that shows how the hardship event resulted in you losing your property.
Regardless of whether the additional super contributions you’re making for your home deposit come from your before-tax income (concessional contributions) or after-tax income (non-concessional contributions), the contribution caps still apply.
The total amount of concessional contributions you can make in a year is $27,500. For non-concessional contributions, it’s 110,000 per year. However, there are some instances where you may be able to make contributions above this amount.
Making larger concessional or non-concessional contributions
When you withdraw money that you made as a concessional contribution (e.g. salary sacrifice contributions), the ATO will deduct tax from the amount they pay to you. This is because these contributions were made from your before-tax income, so you haven’t paid income tax on that amount. However, it won’t be as high as your marginal tax rate. The money (including any associated earnings) will be taxed at your marginal tax rate including the Medicare levy, but with a 30% tax offset.
When you withdraw money that you made as a non-concessional contribution (e.g. a personal contribution that you didn’t claim a tax deduction for), the ATO won’t deduct any tax from the amount they pay to you. This is because you already paid tax on that money.
Brooke and Daniel save a deposit of $110,346 using the FHSSS
Brooke and Daniel are saving up to buy their first home. Brooke earns $85,000 per year and Daniel earns $78,000. They both decide to contribute an additional $15,000 to super each year from their before-tax income using a salary sacrifice arrangement with their employers. These contributions will be subject to 15% super contributions tax, which means the net amount of their annual contributions will be $12,750.
After four years, and assuming an earnings rate of 6.90% p.a.,* Brooke and Daniel will have each saved an additional $58,726 that they can apply to withdraw using the FHSSS.
The ATO deducts tax from these contributions and earnings at their marginal tax rates, but with a 30% tax offset. This gives Brooke and Daniel a net withdrawal amount of $55,016 and $55,331 respectively, meaning they have a combined amount of $110,346 that they can put towards their first home deposit.
*The ATO uses a deemed interest rate (the ‘shortfall interest charge’ rate) to calculate daily compounded earnings that can be released under the FHSS scheme. This rate is 6.90% p.a. for the July to September quarter of the 2023–24 financial year. This case study assumes contributions are made half way through each year for earnings calculation purposes.
Additional rules may apply, so do your research before making any decisions. The FHSSS page on the ATO website has all the details you’ll need.
You may also want to check your state or territory’s First Home Owner Grant information to see what else you may be eligible for.
How does super work? What are the different types? Find out in our complete guide to superannuation.
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