If you’re saving for a deposit on your first home, the Federal Government’s new First Home Super Saver Scheme (FHSS) could help you reach your target sooner, by allowing you to save for your deposit inside your super.

A first home deposit faster

A government initiative introduced in late 2017, the FHSS Scheme is aimed at helping first home buyers save for their first home. The FHSS allows individuals to access certain eligible contributions made to their super account, taking advantage of super’s concessional tax treatment on investment returns. The program functions as a way of helping Australians onto the property ladder.

Basically: while investment earnings in your own name are taxed at your marginal tax rate (which may be up to up to 47%), investment earnings in super accumulation are only taxed at up to 15%.

FHSS benefits

Investment returns OUTSIDE super Investment returns INSIDE super
Marginal tax rate (may be up to 47% including Medicare levy) Taxed only up to 15%

How does it work?

The FHSS allows you to withdraw eligible voluntary contributions made into your super account (from 1 July 2017). You can contribute up to $15,000 per year, and $30,000 in total under the Scheme. You can then withdraw eligible contributions to use specifically for a first-home deposit. You can only make a withdrawal from 1 July 2018.

You’ll also be able to access associated earnings (calculated by the ATO based on a set rate2) on eligible contributions that you withdraw. Depending on market conditions, your super savings may earn more than they would in a regular savings account. You’re also likely to save on tax.

Eligible contributions include:

  • Salary sacrifice contributions
  • Personal contributions, and
  • Voluntary employer contributions (does not include mandatory employer contributions such as Super Guarantee)

Contributions must be made within the existing concessional and non-concessional caps1. The type of voluntary contributions you make into super will affect the maximum release amount. You can withdraw 100 per cent of your eligible non-concessional (after-tax) contributions and 85 per cent of eligible concessional (pre-tax) contributions.

Who is eligible?

To be eligible for the FHSS Scheme, you need to be able to answer yes to the following:

  • You’ve never owned any property in Australia – this includes an investment property, commercial property, a lease of land in Australia, or a company title interest in land in Australia
  • You’re not using FHSS amounts to purchase the following type of property: any premises not capable of being occupied as a residence, a houseboat, a motor home, or vacant land
  • You’ve not previously requested a FHSS release authority
  • You’re aged 18 years or older (at the time of withdrawal)

Eligibility is assessed on an individual basis, which means if you’re a couple or looking to purchase a property with a sibling or a friend you can pool your funds as long as you all can meet the requirements. For more information on eligibility, visit the ATO’s page on the FHSS Scheme.

Withdrawing your funds

From 1 July 2018, you can apply to withdraw eligible contributions, along with any associated earnings, for the purchase (or construction) of your first home.

Earnings are calculated by the ATO based on a formula, rather than actual earnings on these amounts in your fund2.

You can apply for the release of voluntary contributions up to a maximum of $15,000 from any one financial year and $30,000 in total across all years.

Certain components of the total amount released to you will be subject to tax. Generally this will include any concessional contributions released, plus total associated earnings. These assessable components will be taxed at:

  • Your marginal tax rate less a 30% offset, or
  • 17% if the Commissioner is unable to estimate your expected marginal rate.

Your summary will show the amount of tax withheld for you to include in your tax return for the year you request the release.

As well as meeting the terms above, you must occupy (or intend to occupy) the property as soon as it is practical to do so, plus live in the property for at least six of the first 12 months you own it (from when it is practical to move in).

In most cases, you need to purchase the property within 12 months of having the funds released to you.

If you don’t use the funds for the above purpose, you will either need to contribute the funds back to super as a non-concessional contribution, or pay additional tax.

It is important to understand that, if after you make eligible voluntary contributions, your intentions change, and you no longer intend to purchase a home, you won’t be able to access the funds you contributed until you meet a ‘condition of release’. Based on current law, this is unlikely to occur until you reach age 65, or retire after reaching your preservation age (see ATO website for more information).

Case study: Michelle and Nick

Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund. After three years, she is able to withdraw $25,758 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30% offset.

If Michelle had instead deposited these amounts (net of PAYG tax) into a savings account in her name earning 2%, she would have had approximately $6,239 less to use as a deposit at the end of the same three year period3.

Make sure your nominated super fund or funds will release the money – some super funds, including defined benefit and constitutionally protected funds, may not. You should also check whether you’ll have to pay any fees or charges.

Financial advice

If you think the FHSS scheme could work for you, an adviser can help you make the most of the opportunity. You can call us on 1300 558 863 or make an appointment with a professional financial planner.


Important information

This information is provided by National Australia Bank Limited ABN 12 004 937 AFSL No. 230686 (NAB), a member of the National Australia Bank Group of companies. Any advice is general in nature and has been prepared without taking into account your personal objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to those matters. See the NAB Financial Services Guide for details about relationships between NAB and product issuers, and remuneration or benefits that may be received in relation to NAB’s authorised services.

1The concessional contribution cap for 2018/2019 is $25,000 for all Australians. The annual non-concessional contribution cap is $100,000. Your non-concessional cap is nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2018–198) at the end of 30 June of the previous financial year. ato.gov.au

2Deemed rate of return is based on the 90-day Bank Bill rate plus three percentage points

3These estimated outcomes have been modelled using the online Government estimator, accessed on 8 May 2018. Actual returns and relative outcomes may differ depending on performance of markets and deposit products.

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