Some first home buyer support helps you buy with a smaller deposit. Some come in the form of a grant. The First Home Super Saver Scheme (FHSS) works differently.
Rather than providing a payment or loan guarantee, the Australian Government scheme allows eligible first home buyers to build part of their deposit through voluntary superannuation contributions.
This can make it another option for buyers who are planning ahead and looking at different ways to save.
However, the FHSS isn’t a way to access your existing super balance. It only applies to eligible voluntary contributions you have made into your super fund, plus an amount of associated earnings.
It also doesn’t replace the need for a deposit, loan approval or traditional savings.
How does it work?
Under the FHSS Scheme, you can make eligible voluntary contributions into your super fund and later apply to release those amounts to help buy your first home.
The scheme allows you to contribute up to $15,000 in any one financial year, and up to $50,000 across all years.
These voluntary contributions may include salary sacrifice contributions or personal after-tax contributions. Compulsory employer super guarantee contributions do not count.
When you apply to release the money, the amount you can access depends on the type of contributions you made.
You may be able to release:
- 100 per cent of eligible after-tax voluntary contributions
- 85 per cent of eligible before-tax voluntary contributions, such as salary sacrifice contributions
- an amount of associated earnings calculated by the ATO.
The released amount is paid by your super fund to the Australian Tax Office (ATO), which withholds tax before paying the remaining amount to you.
Who can use the scheme?
To use the FHSS Scheme, you must meet the eligibility rules.
These include:
- being 18 years or older when you request a determination
- not having previously owned property in Australia, including vacant land, commercial property or an investment property
- not having previously made a valid FHSS release request
- intending to live in the home as soon as practicable
- intending to live in the home for at least six months within the first 12 months after it is practicable to do so.
There are limited exceptions for people who have previously owned property but have experienced financial hardship.
If you are buying with another person, each eligible buyer can use the FHSS Scheme separately. This means two eligible buyers may each be able to access their own eligible contributions.
What types of homes can you buy?
The FHSS Scheme can generally be used to buy or build a residential property in Australia.
This may include a new or established house, unit, townhouse or apartment.
It cannot be used to buy vacant land on its own. However, it may be used where you enter into a contract to construct a home on vacant land, as long as the timing and eligibility rules are met.
The scheme also cannot be used to buy a houseboat, motor home or property that cannot be occupied as a residence.
When do you apply?
The timing rules for the FHSS Scheme are important, so it’s worth understanding the process before you make an offer or sign a contract.
Before you can access your FHSS amount, you need to request a determination from the ATO. This tells you the maximum amount you may be able to release from your voluntary super contributions.
You then need to make a release request before your property contract is completed, which is generally at settlement.
You will also need to notify the ATO once you have signed a contract to buy or build your home.
Because the process involves your super fund and the ATO, it is a good idea to check the steps early and allow enough time before settlement.
What else should you know?
The FHSS Scheme can be useful if you are planning ahead and want to save part of your deposit through super, but it will not suit every first home buyer.
Before making extra contributions, check how the scheme works with your super fund, contribution caps, tax position and broader savings plan.
You should also think about how it fits with your borrowing capacity and any other first home buyer support you may be eligible for, including the Australian Government 5% Deposit Scheme, WA’s First Home Owner Grant or the first home owner rate of duty.
Before using the scheme, check the ATO’s First Home Super Saver Scheme page and consider speaking with your super fund, lender, broker or financial adviser.
