The First Home Super Saver Scheme (FHSS) Explained

The journey to homeownership can be challenging, especially when it comes to saving for that all-important deposit. However, the Australian government has taken steps to make this dream more achievable through the First Home Super Saver Scheme (FHSS). Launched in 2018, this innovative initiative offers a tax-efficient pathway for individuals to save money specifically for their first home. 

In this article, we will delve into the key features and benefits of the FHSS, empowering you with the knowledge to kickstart your homeownership journey.

What is The First Home Super Saver Scheme (FHSS)?

The First Home Super Saver Scheme (FHSS) is a government program that allows first home buyers to save money in their super fund to help them buy a home. The scheme was introduced in 2017 and has been very popular, with over $10 billion in contributions made so far.

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Eligibility Criteria

To be eligible for the FHSS, you must meet the following criteria:

  • You must be 18 years old or over.
  • You must not have owned a home in Australia before.
  • You must not be using the FHSS to purchase another property.
  • You must not have requested the release of FHSS funds to purchase a home before.

If you meet the eligibility criteria, you can make voluntary contributions to your super fund up to a maximum of $15,000 per year. These contributions will be eligible for the FHSS, meaning that you can withdraw them when you buy your first home.

You can withdraw your FHSS contributions up to 12 months after you sign a contract to purchase a home or start building a home. When you withdraw your contributions, you will need to pay tax on them. The amount of tax you pay will depend on your marginal tax rate.

How does the First Home Buyer Super Save Scheme Work?

The First Home Super Saver Scheme (FHSS) allows eligible individuals to save for their first home within their superannuation fund. By making voluntary contributions and accumulating earnings, individuals can grow their savings. Once ready to purchase a home, they can apply for the release of FHSS funds, which can be used as a deposit. After buying the home, the release of funds must be reported on the tax return to ensure compliance with the scheme’s regulations and tax obligations.

How To Use The FHSS

To use the FHSS, you will need to do the following:

  • Make voluntary contributions to your super fund up to a maximum of $15,000 per year.
  • Get a determination from your super fund stating that you are eligible for the FHSS.
  • Sign a contract to purchase a home or start building a home.
  • Apply to the ATO to release your FHSS contributions.
  • The ATO will process your application and will release your contributions to you within 28 days. You will then need to pay tax on your contributions.
  • After ATO approval, access your FHSS funds and use them, along with earnings, as a deposit for your first home purchase. Use the funds within 12 months.
  • Proceed with your first home purchase, ensuring it will be your primary residence. Follow any additional requirements and processes involved in the buying process.
  • Report the release of FHSS funds on your tax return after purchasing your first home to comply with regulations and meet tax obligations.

What Are The Benefits Of The FHSS Scheme?

The First Home Super Saver Scheme (FHSS) offers several benefits to individuals looking to save for their first home. Here are the key advantages of participating in the FHSS:

  • Tax advantages: One of the primary benefits of the FHSS is the tax advantages it provides. Contributions made under the scheme are taxed at a concessional rate of 15%, which is generally lower than an individual’s marginal tax rate. This means more of your hard-earned money can go towards saving for your first home.
  • Faster savings growth: By utilizing the FHSS, individuals can leverage the investment performance of their superannuation fund to accelerate their savings’ growth. Contributions made within the fund have the potential to accumulate earnings over time, boosting the overall savings available for a home deposit.
  • Higher savings potential: The FHSS allows individuals to contribute more towards their first home deposit by making voluntary contributions to their superannuation fund. The contribution limits set by the scheme, such as the annual cap of $15,000 for before-tax contributions, provide an opportunity to save a substantial amount specifically for a first home.
  • Assistance in entering the property market: The FHSS aims to assist first-time buyers in entering the property market sooner by providing a tax-efficient savings vehicle. By taking advantage of the tax benefits and accumulated earnings, individuals can potentially accumulate a larger deposit, making homeownership more achievable.
  • Flexibility in savings strategies: The FHSS offers flexibility in saving strategies by allowing individuals to make voluntary contributions before or after-tax, including through salary sacrifice arrangements. This flexibility allows individuals to tailor their savings approach to best suit their financial circumstances and goals.
  • Joint participation for couples: The FHSS allows couples to pool their resources together, as both individuals can individually access the FHSS funds. This means a couple can potentially save a higher amount towards their first home deposit, as the maximum amount that can be released is $30,000 per individual or $60,000 for a couple.

FHSS has specific rules and guidelines, and it’s recommended to consult with a financial advisor or visit the official Australian government websites for the most up-to-date and accurate information regarding the benefits and requirements of the FHSS.

Are There Any Restrictions Or Conditions To Be Aware Of?

Yes, there are certain restrictions and conditions associated with the First Home Super Saver Scheme (FHSS) that individuals should be aware of. Here are the key restrictions and conditions:

  • Eligibility criteria: Must be 18 or older, never owned property in Australia before, and intend to live in the purchased property.
  • Contribution limits: Annual limit of $15,000 for before-tax contributions and an overall limit of $30,000 per individual.
  • Timeframe for withdrawal: Apply for release within 12 months of signing a contract or requesting determination from the ATO.
  • Intended use: Funds can only be used for purchasing or constructing a first home.
  • Reporting requirements: Report the release of FHSS funds on the tax return.
  • Superannuation preservation rules: Regular preservation rules apply, with funds generally remaining in the superannuation system until retirement age.

Disclaimer For Australian Expats Living Overseas And Foreign Buyers

If you are an Australian expat living overseas or a foreign buyer, you can still use the FHSS. However, there are a few things you need to keep in mind:

  • You must be a resident of Australia for tax purposes in order to be eligible for the FHSS.
  • You must have a super fund in Australia.
  • You must make your voluntary contributions to your Australian super fund.
  • If you are unsure whether you are eligible for the FHSS, you should contact your super fund or the ATO.

Speak to a Mortgage Broker

Partnering with Odin Mortgage can simplify your mortgage process and help you find the perfect loan. We are the leading mortgage brokerage serving Australian expats and foreign buyers looking to invest in Australia. With their expert guidance, access to multiple lenders, and personalized advice, our mortgage broker can save you time and effort while securing competitive rates and terms. 

We offer tailored solutions based on your unique financial situation and provide ongoing support beyond loan approval. 

Contact us today to get a free consultation.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently asked questions

You can save a maximum of $50,000 in your super fund for the FHSS. This is the total amount of eligible contributions that you can make over all years.

You can withdraw your FHSS contributions up to 12 months after you sign a contract to purchase a home or start building a home.

You will pay tax on your FHSS contributions at your marginal tax rate. For most people, this will be around 30%.

If you don’t buy a home within 12 months of withdrawing your FHSS contributions, you will need to pay back the tax that you saved. You will also need to pay interest on the amount that you owe.

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