FHSS Scheme: How to Use Your Super to Buy Your First Home Sooner
Key Takeaways
• The First Home Super Saver (FHSS) scheme lets you save for your deposit inside super, where it is taxed more lightly, then withdraw it to buy your first home.
• You can count up to $15,000 of voluntary contributions a year, up to a total of $50,000, and withdraw that plus an amount for earnings.
• Because before-tax super contributions are taxed at just 15% rather than your full marginal rate, many savers build a deposit faster than in an ordinary bank account.
• It uses only voluntary contributions, not your compulsory employer super, and it is run by the ATO, so there are clear steps to follow.
Saving a deposit is the hardest part of buying a first home, and often the slowest. The First Home Super Saver scheme, usually shortened to FHSS, is a clever way to speed it up by saving inside your superannuation, where the tax treatment can work in your favour. For many first-home buyers, it is one of the most overlooked tools available.
It can sound complicated, but the idea is simple: put extra money into a super, let it grow with a tax advantage, then draw it back out when you are ready to buy. Here is how the FHSS scheme works in plain English, who can use it, and how it can help you reach your deposit sooner.
The FHSS scheme works best when it fits neatly with the rest of your plan: your deposit, your loan, and your timing. If you would like a hand putting the pieces together, our local broker team at Loan Street Finance is happy to talk it through, with no cost and no pressure.
What the FHSS Scheme Is
At its heart, the scheme uses the favourable tax rules inside super to help you save faster. Here is the basic idea before we get into the details.
The First Home Super Saver scheme lets you make extra, voluntary contributions into your super fund, then later withdraw those contributions, along with an amount for the earnings they make, to put toward your first home. The appeal is the tax treatment: money you salary-sacrifice into super is generally taxed at 15%, which, for most people, is lower than the tax they would pay on the same money in their take-home pay. That difference can help your deposit grow faster than it would in a regular savings account. The scheme is run by the Australian Taxation Office (ATO), which handles the withdrawal side.
How Much You Can Contribute and Withdraw
There are clear limits on what counts toward the scheme, and it's worth knowing them before you start adding money.
The Yearly and Total Limits
You can count up to $15,000 in voluntary contributions toward the scheme in any one financial year, for a total of $50,000 across all years. If you are buying with a partner, each of you can use the scheme on the same home, so a couple could potentially put up to $100,000 toward their deposit between them.
The Contributions That Count
Only voluntary contributions count, including both before-tax contributions, such as salary sacrifice, and after-tax personal contributions. Your compulsory employer contributions, the standard super guarantee your employer pays, do not count toward the scheme. It is the extra you choose to add that you can later withdraw.
The Amount You Get Back
When you withdraw, you can take out up to 85% of your before-tax contributions and 100% of your after-tax contributions, plus an amount for the earnings the ATO calculates using a set formula rather than your fund's actual returns. A small amount of tax applies on the way out, which we explain next.
The Tax Benefit, Explained Simply
The tax treatment is the whole reason the scheme works, so it is worth understanding without getting lost in the weeds.
When you salary sacrifice into super, the money is taxed at 15% going in, rather than at your marginal tax rate, which for many first home buyers is around 30% or more. That is an immediate saving. When you later withdraw under the scheme, the released amount is included in your income, but you receive a 30% tax offset, so the effective tax is your marginal rate minus 30%. For someone on a 32% rate, that can mean only a couple of per cent of tax on the way out. For most savers, the combined effect is that you keep more of your money than you would by saving the same amount in a normal bank account. The scheme can help, but it is not magic, so it is best treated as a sensible head start rather than a windfall.
Who Can Use the Scheme
The eligibility rules are fairly straightforward, and they are assessed for each person rather than for each property.
• You must be 18 or older to request a withdrawal, though you can start contributing earlier.
• You must be a genuine first home buyer who has not owned property in Australia, with limited exceptions such as financial hardship.
• You must intend to live in the home you buy, and move in within the required time once it is practical to do so.
• You must not have previously requested an FHSS release, since the scheme can be used only once.
• It is assessed per person, so two eligible buyers can each use it on the same home.
Because it is assessed individually, couples and co-buyers can effectively double the amount they contribute to the deposit.
How the Process Works, Step by Step
The scheme has a clear order of steps, and getting them in the right sequence matters, especially the timing near the end.
Making Your Contributions
Over one or more financial years, you make voluntary contributions to your super, keeping within the $15,000 yearly and $50,000 total limits that count toward the scheme.
Requesting a Determination and Release
When you are ready to buy, you ask the ATO for an FHSS determination, which tells you the maximum you can withdraw. You then request a release, and the ATO pays the money to you after withholding some tax.
Buying Within the Time Limit
Once the money is released, you generally have 12 months to sign a contract to buy or build, with the period extendable to 24 months in some cases. You must tell the ATO within 28 days of signing. If you do not buy in time, you can either recontribute the money to your super or keep it and pay an extra tax.
A Real-World Example: Saving a Deposit Faster
Here is an illustration with rounded figures showing how the scheme can help. Treat it as a guide, since tax rates and earnings vary by person.
Say you sacrifice $10,000 a year into super for three years, a total of $30,000, specifically to use under the scheme. Because those contributions are taxed at 15% rather than, say, a 32% marginal rate, more of your money lands in super than would have reached a regular savings account from the same pay.
When you are ready to buy, you apply to the ATO and withdraw your eligible contributions plus the deemed earnings, with the withdrawal taxed at your marginal rate less a 30% offset. The net result for most savers is a noticeably larger deposit than the same effort would have produced outside super.
That deposit can then be combined with other forms of assistance, such as the 5% Deposit Scheme, to help you get into your first home sooner. The FHSS scheme does the saving; the other schemes can help with the buying.
Tips for Getting the Most From It
A few simple moves help you make the scheme work harder and avoid the common traps.
• Start early, because the sooner you begin voluntary contributions, the more you can build within the limits.
• Mind the annual super caps, since FHSS contributions still count toward your normal yearly contribution limits.
• Keep records of your voluntary contributions, as only those count toward the scheme.
• Request your determination before you start house hunting, so you know your numbers.
• Watch the 12-month window after release, and tell the ATO within 28 days of signing a contract.
Because the rules involve tax and super, it is worth getting advice tailored to your situation before you commit.
Where to Read More
The scheme is run by the Australian Taxation Office, and its page on the First Home Super Saver scheme sets out the current limits, eligibility, and the exact steps to apply. It is the authoritative source, so it is the best place to confirm the details and the latest figures for your situation.
Frequently Asked Questions (FAQs)
Can I use my whole super balance to buy a home?
No. The scheme only lets you withdraw voluntary contributions you have made, plus an amount for their earnings, up to set limits. Your existing super balance and your employer's compulsory contributions stay locked away for retirement.
How much can I withdraw under the FHSS scheme?
You can count up to $15,000 of voluntary contributions in any single financial year, up to a total of $50,000 across all years, plus the deemed earnings on those contributions. A couple buying together can each use the scheme on the same home.
Does my employer's compulsory super count?
No. Only voluntary contributions count, such as salary sacrifice or personal after-tax contributions. The compulsory super guarantee your employer pays does not count toward the scheme.
Can my partner and I both use the scheme?
Yes. The scheme is assessed per person, not per property, so if you are both eligible first-home buyers, you can each use it on the same home. Between you and me, that could mean up to $100,000 toward your deposit.
What happens if I do not buy a home after withdrawing?
You have options. After the money is released, you generally have 12 months, extendable to 24, to sign a contract. If you do not, you can recontribute the amount to your super or keep it and pay an extra tax on it, so you are not left stuck.
Is the FHSS scheme worth it compared to a normal savings account?
For many savers, yes. Because contributions can be taxed at 15% rather than your full marginal rate, you often keep more of your money than saving the same amount in a bank account. The catch is that the money is locked in super until you withdraw it for a home, so it suits money you are committed to using for that purpose.
The Bottom Line
The First Home Super Saver scheme is one of the quieter achievers in the first home buyer toolkit. By letting you save in a super, where contributions can be taxed at just 15%, it can help you build a deposit faster than an ordinary savings account, with a limit of $15,000 a year and $50,000 in total. Run by the ATO, it follows a clear set of steps from contributing to withdrawing.
It is not for everyone, since the money is committed to buying a home, and the rules involve a bit of tax and timing considerations. But for disciplined savers with a clear plan to buy, it can be a genuinely useful head start, especially when combined with the other schemes. If you would like help working out whether it fits your plans, we are always happy to talk it through.