First Home Super Saver Scheme (FHSS)

The First Home Super Saver (FHSS) Scheme was designed to help first-time homebuyers save for a deposit faster by using their superannuation fund.

Could this be the faster way into the property market for you or someone you know?

The First Home Super Saver Scheme was introduced by the Australian Government in 2017 to help first-time homebuyers save for a deposit faster by using their superannuation fund. The scheme allows eligible individuals to make voluntary contributions to their super fund and later withdraw those contributions, plus any earnings, to buy their first home.

Because superannuation funds benefit from concessional tax rates, contributions made through this scheme can grow faster compared to saving through a regular bank account.

How Does the FHSS Scheme Work?

1. Make Voluntary Contributions – You can contribute up to $15,000 per financial year, with a total cap of $50,000 across multiple years. These contributions can be either:
   • Concessional Contributions (pre-tax) – such as salary sacrifice or personal contributions claimed as a tax deduction. Taxed at 15% instead of your marginal tax rate.
   • Non-Concessional Contributions (after-tax) – voluntary contributions made from your after-tax income.
2. Withdraw Your Savings – When you’re ready to buy your first home, you can apply to withdraw up to $50,000 of eligible contributions (plus associated earnings).
3. Use Funds for a Home Deposit – Once withdrawn, you must use the funds to buy or build a home within 12 months.

Who Is Eligible for the FHSS Scheme?

To use the First Home Super Saver Scheme, you must:

• Be 18 years or older to request a withdrawal.
• Have never owned property in Australia before, including investment properties.
• Have not used the FHSS Scheme previously.
• Be buying a residential home – vacant land is not eligible unless you are building on it.
• Live in the home for at least six months in the first 12 months of ownership.

How to Apply for the FHSS Scheme

If you meet the eligibility criteria, here’s how you can apply:

1. Start Making Voluntary Contributions – Contribute through your employer (salary sacrifice) or directly to your super fund.
2. Check Your Super Fund – Ensure your fund allows voluntary contributions and withdrawals under the FHSS Scheme.
3. Request a Determination from the ATO – Before withdrawing, apply for an FHSS determination from the Australian Taxation Office (ATO) to confirm your eligible withdrawal amount.
4. Apply for FHSS Release – Once approved, submit an application to the ATO to release your savings.
5. Use the Funds for Your Home – You have 12 months to sign a contract to buy or build a home using your FHSS funds.

Benefits of the FHSS Scheme

Faster Savings Growth – Because superannuation contributions are taxed at a lower rate (15%) compared to marginal tax rates, your savings accumulate faster.

Tax Advantages – Using pre-tax salary contributions reduces taxable income, meaning you pay less tax while saving for a deposit.

Higher Returns – Super funds generally offer better interest rates than standard savings accounts, helping grow your savings more effectively.

A Structured Saving Plan – Encourages disciplined, long-term saving by restricting access to funds until a home purchase is made.

Potential Drawbacks of the FHSS Scheme

Limited Contribution Amounts – The $15,000 annual cap may not be sufficient for those needing a large deposit quickly.

Delays in Accessing Funds – The withdrawal process can take time (several weeks), so it's crucial to plan ahead when purchasing a home.

Strict Rules – If you don’t buy a home within 12 months of withdrawing funds, you may need to request an extension or reinvest in super.

Superannuation Risks – Investment fluctuations within your super fund could affect how much you can withdraw when needed.

Is the FHSS Scheme Right for You?

The FHSS Scheme is a great option for first-time buyers looking to save efficiently while reducing their tax burden. However, it may not suit everyone. If you:

• Need to buy a home urgently, the scheme’s withdrawal process might slow you down.
• Already have substantial savings, it may be unnecessary.
• Have irregular income, making consistent voluntary contributions difficult.

Talk to Fincare Accountants to See If the FHSS Scheme Aligns With Your Financial Goals

At Fincare Accountants, we can help you explore your option for first- home saving and:

• Assess whether FHSS is the right savings strategy for you.
• Maximise your tax benefits while saving for a home.