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September 12 2024
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Can you use your super to help buy your first home?

Your super can help you save for your first home with the First Home Super Saver (FHSS). Learn more about it below.

The FHSS scheme lets eligible people take out voluntary super contributions to help them buy their first home. This excludes Super Guarantee (SG) contributions from your employer.

Using the scheme could help accelerate savings and may offer potential tax benefits. However, strict rules, limits, and timeframes apply to the scheme.

This article will cover the following questions:

Am I eligible for the First Home Super Saver scheme?

You may be eligible if you:

  • are aged 18 years or older when requesting a FHSS determination or release of money. But the good news is thatyou can start to make contributions before you turn 18).
  • haven't previously owned property in Australia (if you’ve previously owned a property in Australia but lost ownership of all your property interest due to financial hardship, you can apply to be considered under the financial hardship provision via the ATO).
  • haven’t previously received a release of your super savings under the FHSS scheme.

How much can I withdraw?

Under the FHSS scheme, you can apply to withdraw up to $15,000 of any eligible extra contributions you make in any one financial year, up to a total of $50,000 of eligible contributions across all years. For example, if you make $17,000 in eligible contributions in one financial year, only $15,000 of this amount can be counted towards your final withdrawal.

You can withdraw:

  • 100% of your eligible non-concessional contributions.
  • 85% of your eligible concessional contributions.
  • any deemed earnings made on the above contributions (you should take this into account when calculating your withdrawal amount).

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What are deemed earnings?

Deemed earnings are the assumed income associated with your contributions. It’s based on the ATO’s deeming rate, which provides a fixed earnings rate to work out income from investments, like your super. It might be different to the actual earnings you made through your fund. Note that concessional contributions and deemed earnings are subject to tax (we’ll explain further below).

What super contributions are eligible for the First Home Super Saver scheme?

Not all contributions you make are counted towards FHSS. That’s why it’s important that if you choose to use the scheme to save for your first home, you're making the right types of contributions to your super.

Contributions that are eligible Contributions that aren't eligible
  • Voluntary concessional you made after 1 July 2017 – contributions made before-tax (e.g. salary sacrifice and personal deductible contributions)
  • Voluntary non-concessional contributions you made after 1 July 2017 – contributions made after-tax (e.g. extra contributions which you didn’t claim a tax deduction for).
  • Mandatory SG contributions made by your employer
  • Spouse contributions
  • Amounts received from a contribution-splitting arrangement
  • Government co-contributions
  • Amounts that exceed contribution caps


What are the pros and cons of using super to buy a home?

Pros Cons
  • Potential tax savings – You could save money on taxes, compared to saving outside of super (that may be subject to your marginal tax rate), which can help boost your deposit savings
  • Saving discipline – Unlike your bank account, where your funds are easily accessible, you generally can't withdraw your super whenever you want, as there are ‘strict conditions of release’. Think of it as forced savings that may even generate potential returns. It can be especially useful for those who find it hard not to dip into their savings.
  • Complex rules – Under the FHSS scheme, specific rules apply to when, what, and how much you can withdraw. Separately, there are also limits on how much you can contribute to your super. These rules can be tricky to navigate so it’s important to check the rules early on, and well before you sign a contract to buy a home with the expectation of withdrawing funds through the FHSS.
  • Strict withdrawal limit – The maximum you can withdraw is $50,000 (including associated earnings) which may not be enough to cover a standard 20% deposit and other costs. Consider crunching the numbers early in the process so you know how much you’ll need upfront and how much you’ll need to save outside of super.
  • Strict time limit – You must use your FHSS funds to purchase a home within 12 months of release. If you don’t, you must either recontribute the funds back to your super or keep the funds and pay an FHSS tax of 20%.
  • Access – Funds may not be as easily accessible through your super as they are by other means such as a savings account so it’s important to consider whether making extra contributions to use the scheme is right for you.
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Make sure you check your contribution caps as the government limits how much you can contribute. If you contribute too much, you may have to pay extra tax. Learn more about contribution caps on the ATO website.

Can I use super to help buy a home with another person?

Yes, if you’re buying your first home with another person and you’re both eligible, you can both take advantage of the FHSS scheme. This would double your total cap from $50,000 to $100,000. You’ll each build up your FHSS-eligible contributions in your own super accounts.

What is the step-by-step process of using super to help buy my first home?

Here’s a step-by-step process of using the FHSS scheme to help buy a home.

  1. Make sure you’re eligible for the FHSS scheme and that using the scheme is right for you. Speak to a licensed financial adviser if you have any questions.

  2. If you’re eligible and have done your research, start making voluntary super contribution

  3. Keep checking how much you have saved for the scheme to help you keep track of the maximum FHSS amounts you can release.

  4. Ask the ATO for a determination where they’ll tell you the maximum amount that can be released. You can do this online using your myGov account linked to the ATO. This can be done multiple times.

  5. When you’re ready, you can request the ATO to release the amount, again using your ATO-linked myGov account. This can only be done once. However, from 15 September 2024, if you made a request but haven’t yet received^ any funds, you may be able to amend or withdraw your FHSS scheme application. You can then reapply in the future if needed.

  6. You can now enter into a contract to buy or build your home. You’ll need to do this within 12 months from the date you make a valid release request to the ATO (they may grant an extension).

    • You can also enter into a contract before you apply to the ATO for release of your super, as long as you already have a determination from the ATO, and you make a release request within 90 days of entering into the contract.

  7. The ATO will ask your super fund to take that amount from your super account and send it to the ATO.

  8. When the ATO receives the amount from your super fund, they will take out the right amount of tax and pay the balance to you, directly into your bank account (it’s a good idea to double check your bank account details in myGov before requesting a release). The ATO estimates this will take 15-25 business days, which you should factor into your buying timeline.

^An amount under the FHSS scheme is regarded as having been effectively paid to an individual once the ATO initiates the payment process, despite the individual not yet having received the funds.

Other requirements

There are additional requirements you must meet around the property you buy using the FHSS scheme. You must:

  • live in the property as soon as practicable and for at least six months within the first year of owning it
  • use funds from the FHSS scheme to buy a property in Australia only
 

Do I get taxed if I withdraw my super to buy a home?

Eligible after-tax contributions are released to you tax-free. Eligible before-tax contributions and associated earnings are taxed at your marginal tax rate, less a 30% tax offset. If the ATO doesn’t know your marginal rate, they’ll apply a 17% tax rate.

The ATO will withhold tax on the released amount. They’ll send you a payment summary at the end of the financial year showing how much super was released to you so you can complete your tax return.

Any tax related information in this article is general information only. You should seek advice from a registered tax professional if you intend to rely on the information. 

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