To be eligible for the scheme you need to:
- have not owned a home before in Australia
- be 18 years old or over
- have not previously released First Home Super Saver funds
- live or intend to live in the property you are buying as soon as practical (as determined by the Australian Taxation Office [ATO])
- intend to live in the property for at least six months of the first 12 months you own it (after it is practical to move in)
- buy the type of property which is included in the Scheme
How do you make contributions?
Concessional (before tax) contributions
You can ask your employer to redirect some of your salary before it is taxed.
These are often called salary sacrifice arrangements and can be an effective way to reduce your taxable income. These are taxed at 15%.
Non concessional (after tax) contributions
You can make personal contributions from your after tax salary, up to a limit, which you can check on at the ATO website.
If you earn equal to or less than $36,813 a year and you make a non-concessional contribution of $1,000, the government also makes a co-contribution to the maximum value of $500.
If you earn between $36,813 and $51,813 per year, you may still be eligible for a smaller co-contribution, however the amount will depend on your income and how much you contribute.
Generally, this method may be chosen to take advantage of the government co-contribution, whereas the concessional contributions can have tax advantages as outlined below.
The ATO uses payment ordering rules to calculate your maximum release amount. You can read more under 'contributions you can make' on the ATO website.
What are the tax advantages of the First Home Super Saver Scheme?
Released amounts (with the exception of after tax contributions) to buy your first home will be taxed at either your marginal tax rate less a 30% offset or 17% if the Commissioner of Taxation is unable to estimate your expected marginal rate, and are allowed from 1 July 2018.
For example, by taking advantage of the FHSSS, the Federal Government estimates that a taxpayer earning $65,000, who makes $6,000 in pre-tax contributions each year could save an extra $7,416 more for a home than if they had put their savings into a standard bank account as per the explanation below.¹