Insights

Buying your first home is a major milestone but saving for a deposit can feel like an uphill battle. The Australian Government’s First Home Super Saver Scheme (FHSSS) offers a strategic, tax-effective way to accelerate your savings using your superannuation fund. Whether you’re a first-time buyer or a parent looking to support your child’s future purchase, understanding the tax benefits and implications of this scheme is essential.

What Is the First Home Super Saver (FHSS) Scheme?

The FHSS Scheme allows eligible individuals to make voluntary contributions to their superannuation fund and later withdraw those contributions—plus associated earnings—to use as a deposit for their first home.

• Annual contribution limit: $15,000

• Lifetime cap: $50,000

• Types of contributions:

o Concessional (pre-tax): Salary sacrifice or personal deductible contributions

o Non-concessional (after-tax): Personal contributions not claimed as a deduction

• Withdrawable amount:

o 100% of non-concessional contributions

o 85% of concessional contributions

o Plus associated earnings

Tax Benefits

1. Initial Tax Savings on Concessional Contributions: Salary Sacrifice or personal concessional (deductible) contributions lower your taxable income in the year they are made and are taxed at only 15% inside your super fund, often lower than your individual marginal tax rate.

2. Tax Offset on Withdrawal: When withdrawing, you receive a 30% tax offset on the assessable portion.

3. Tax-Effective Growth: Earnings within super are taxed at a concessional rate, helping your savings grow faster.

Implications to Consider

1. Withdrawal and Tax on Released Amounts

When you withdraw your FHSS amount (including associated earnings):

• The assessable portion (concessional contributions + earnings) is included in your tax return in the year you receive it.

• You receive a 30% FHSS tax offset on this assessable amount, reducing the tax payable.

• Non-concessional contributions are not assessable when withdrawn.

2. Other Considerations

If you don’t purchase or construct a home within 12 months of release (with possible extension to 24 months), you may need to recontribute the amount to super or pay additional tax penalties.

FHSS amounts don’t affect HELP/HECS repayments but can impact other income-tested benefits because the assessable amount is included in your taxable income.

Eligibility Checklist

To qualify for the FHSS Scheme, you must:

• Be 18 years or older

• Have never owned property in Australia (exceptions apply for financial hardship)

• Plan to live in the home for at least six months within the first year

• Have made eligible voluntary contributions to your super

• Not have previously made a successful FHSS release request

Steps to Use the FHSS Scheme

1. Check Your Eligibility: To ensure you have a proper understanding of the scheme, visit the ATO FHSS page or speak to your accountant.

2. Make Voluntary Contributions: Ensure your super fund accepts and releases FHSS amounts. Utilise salary sacrifice or personal contributions.

3. Track Your Contributions: Keep records and monitor your super statements to keep track of the annual ($15,000) and lifetime ($50,000) caps.

4. Request a FHSS Determination: Before signing a contract, apply through the ATO to determine how much you can withdraw.

5. Apply for Release: Once approved, request the release of your FHSS amount to use toward your deposit.

6. Buy or Build Within 12 Months: You must enter a contract to buy or build a home within 12 months of receiving the funds, or as otherwise approved by the ATO in limited circumstances.

Tips for Parents Supporting Children

• Gift funds for contributions: Help your child make voluntary contributions to their super.

• Encourage early planning: The sooner contributions begin, the more time these contributions have to grow, typically increasing the associated earnings amount available for release.

• Educate on eligibility: Ensure your child understands the rules and timelines to avoid non-compliance.

Example: FHSS vs Saving Outside Super

Scenario:

• Mitchell earns $90,000 p.a. (marginal tax rate 30% + Medicare levy).

• He salary sacrifices $15,000 into super under FHSS.

• Compare tax outcomes for FHSS vs saving the same amount in a bank account.

Step 1: FHSS Contribution

• Concessional contribution taxed at 15% inside super:

o $15,000 × 15% = $2,250 tax.

• Net amount in super: $15,000 – $2,250 = $12,750.

Step 2: If saved outside super

• $15,000 from salary taxed at marginal rate (30% + 2% Medicare):

o $15,000 × 32% = $4,800 tax.

• Net amount saved: $15,000 – $4,800 = $10,200.

Step 3: Withdrawal under FHSS

• Assume $12,750 grows to $13,500 with earnings.

• Assessable amount = $13,500.

• Taxed at marginal rate (32%) = $4,320.

• Less 30% FHSS offset = $4,320 – $4,050 = $270 tax.

• Net released = $13,500 – $270 = $13,230.

Comparison

• FHSS outcome: $13,230.

• Bank savings outcome: $10,200.

• Extra benefit: $3,030 (plus compounding advantage).

Ready to explore how the FHSS Scheme can work for you or your family?

At Altitude, we help individuals and families navigate the complexities of superannuation and home ownership. Contact our team today for personalised advice and to ensure you’re making the most of every tax-saving opportunity.