Buying a home is one of life’s most exciting and significant milestones. However, homes are costly, and the buying process can be complex for first-time buyers.

There are several options to make the process easier, but one of the best is tapping into the government’s superannuation scheme. This is possible through the First Home Super Saver Scheme (FHSSS). 

In this guide, we’ll help you understand the First Home Super Saver Scheme and its benefits. 

What is the First Home Super Saver Scheme (FHSSS)?

The FHSSS was first introduced in the 2017–18 Federal Budget. Its goal is to allow individuals to make voluntary contributions to the super scheme. These contributions can later be withdrawn to use as a deposit when buying your first home.

This scheme helps individuals accelerate their savings and make it easier to purchase a home. There are fewer taxes, and you also enjoy higher returns.

How the FHSSS Works

Making Contributions

While the FHSSS is part of the superannuation scheme, it has its own guidelines regarding contributions and withdrawals. Contributions eligible for deposit are those made voluntarily. This excludes contributions such as Super Guarantee (SG) contributions made by your employer.

The voluntary contributions are classified into two:

• Concessional Contributions: These are contributions you make before taxation. They provide a huge savings boost as are only taxed at 15%, which is quite low compared to the marginal tax rate (16%-45%). This means that you end up with more money in your superannuation account. It will also accrue more interest.
  Note that you can only contribute and withdraw up to $15,000 in a single financial year, and the total contributions are capped at $50,000.
• Non-Concessional Contributions: These are contributions you make after tax deductions. Since the money has already been taxed, it isn’t taxed again when it goes to your superannuation account. You may be able to claim a tax deduction for these contributions, but this deduction will also count towards your concessional contribution cap. This is because no-concessional contributions still count towards the $15,000 annual limit and the $50,000 total cap.

Tax Benefits

The biggest benefit of using FHSSS instead of a regular savings account is that it offers lots of tax benefits. The first one is the option to contribute before you pay taxes. This allows you to avoid the marginal tax plus the Medicare Levy. Instead, the money is taxed at 15%, allowing you to save more. 

The scheme also benefits non-concessional contributions. The earnings on these contributions are taxed at 15%, which is lower than the rate on regular savings accounts.

The amount you can access will be taxed at your marginal tax rate during the withdrawal. However, there’s a 30% tax offset, which significantly reduces the tax liability.

What’s the Eligibility Criterion?

Due to its huge tax benefits, the scheme has a strict eligibility criterion.

• Minimum Age: You must be at least 18 years old to apply for the funds. However, you can still contribute before this age if you are working more than 30 hours a week and your employer is paying your SG contributions.
• First Home Buyer: You shouldn’t have owned any investment property, commercial property, or vacant land previously. This should also be the first request for the release of FHSSS funds.
• Intention to Live in the Property: The scheme is only for people buying a home to live in (not invest). You should live in the property for at least six months within the first 12 months of purchase.

If you’ve previously owned property, you may still qualify for FHSSS if you’ve undergone financial hardship. In that case, the  ATO will evaluate your eligibility. 

You can visit the ATO website to see all requirements and talk to a financial planning expert to understand how the FHSSS scheme can help boost your first home deposit.

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