The First Home Super Saver Scheme (FHSSS) may help you get a foot into the property market faster by allowing you to save money for your first home inside your superannuation fund. This will help you save faster because of the tax concessions you can get within super.
How does it work?
You can make eligible voluntary super contributions up to $15,000 in any one financial year, however your total contributions that can be used under the scheme cannot exceed $30,000 across all financial years.
The eligible voluntary contributions you can make are:
- before-tax contributions where 15% tax is applied on the amount you contribute eg, salary sacrifice contributions and personal tax deductible contributions. However, the compulsory super guarantee (SG) contributions your employer made on your behalf are not eligible because the contribution has to be voluntary
- after-tax member contributions where no tax is applied on the amount you contribute. The after-tax contribution must be made by you and must be voluntary. Contributions made by anyone else, such as your spouse, will not qualify
To be eligible for the scheme you need to:
- have not previously owned property in Australia1
- be 18 years old or over
- have not previously released funds under the FHSSS
- enter into a contract to purchase or build residential premises located in Australia within 12 months of releasing funds under the scheme
- live or intend to live in the property as soon as practical after the purchase
- intend to live in the property for at least six months of the first 12 months you own it
- request a ‘FHSS determination’ from the Australian Taxation Office (ATO) prior to entering into the contract to purchase or build. This is an estimate of the amount of super you can access under the scheme
- make a valid request to release your FHSS amounts from the ATO within required timeframes. You can check the required timeframes on the ATO’s website.
How do you make voluntary contributions?
You can ask your employer to redirect some of your salary before it’s taxed. These are often called salary sacrifice arrangements and are taxed at 15% compared to personal marginal tax rate of up to 47% (including a 2% Medicare levy).2
You can also make voluntary personal contributions from your after-tax salary, up to a limit, which you can check on the ATO’s website.
When can you withdraw?
A FHSS determination is the ATO’s decision on how much you can release from super under the scheme – your ‘FHSS amount’. You can request a determination multiple times, however you must request a FHSS determination BEFORE you enter into a contract to purchase or build your first home, otherwise your request will be invalid.
When you’re happy with the FHSS amount in your determination, and you are ready to enter the property market, you can request the ATO release all or part of the amount identified in your determination from your super fund.
You can only apply for the release of your FHSSS amount once.
Please see the ATO website for more information on the required co-ordination and timing of determinations, requests for release and entering contracts to purchase your first home.
How much can you withdraw?
The maximum amount you can withdraw under the scheme is the total sum of:
- 85% of eligible before-tax contributions you made
- 100% of eligible after-tax contributions you made
- Associated earnings calculated on these contributions based on a deemed rate that the ATO uses
What you need to consider
While the after-tax contributions can be paid tax-free, all associated earnings plus any before-tax contributions in a withdrawal will be taxed at your marginal tax rate with a 30% non-refundable tax offset.
The super fund must release the FHSSS amounts to the ATO. When the ATO receives the released amounts from your super fund, the ATO will withhold tax (from the before-tax contributions and associated earnings) to help you meet your end of year tax liabilities before paying the amount to you. The amount of tax the ATO will withhold is calculated at either:
- your expected marginal tax rate, including Medicare levy, less a 30% offset or
- 17% if the Commissioner is unable to estimate your expected marginal rate
The amount of tax saving depends on a number of factors such as:
- your marginal tax rate
- whether you’re eligible for the low income superannuation tax offset
- whether you are liable for division 293 tax3 and
- the period of time contributions are invested in the scheme
There may also be some fees, charges and insurance implications that occur when the money is released.
You can read more about the First Home Super Savers Scheme on the ATO website to check if this is the right scheme for you.
1 Subject to financial hardship exceptions. For more information please see https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/#Financialhardshipprovision
2 If you are salary sacrificing amounts to use under the FHSS scheme, confirm with your employer that these contributions will not be classified as Superannuation Guarantee contributions. For the most up to date marginal tax rates please visit https://www.ato.gov.au/Rates/Individual-income-tax-rates/
3 Division 293 tax is an additional tax on super contributions which reduces the tax concession for individuals whose combined income and low tax contributions are greater than the Division 293 threshold. From 1 July 2017 the Division 293 threshold is $250,000. Division 293 tax is charged at 15% of an individual’s taxable contributions.