Launching you into a place of your own

FHSS is a Commonwealth government program that allows you to use super to save for your first home deposit. 

In a nutshell, you contribute to your own super over time, and when you’re ready, you apply to access up to $15,000 for each year you’ve been saving, to a maximum of $50,000.

In addition to the funds you’ve personally contributed, you’ll also receive associated earnings calculated at a rate set by the government, known as the Shortfall Interest Rate.

Saving through the FHSS also brings tax advantages straight away if you make ‘before-tax’ contributions. 

This can be through:

• Salary sacrificing, where you arrange for your employer to divert some of your pay directly into your super – over and above what they contribute.
• Contribute-and-claim method, which is when you put extra money from your savings ‘after-tax’ into your super, and then claim a deduction at tax time.

When money you’ve earned is paid into your super this way, it’s generally only taxed at 15% instead of your normal rate of income tax (which is generally higher). 

You can also make after-tax contributions that you don’t claim a tax deduction on towards the FHSS scheme.

Note that there’s a cap on the annual amount of contributions you can make and limits on the amount of eligible contributions that can count towards your maximum releasable amount.

Yes, but only if you’ve made your own, voluntary contributions to your super – that means, you can’t access any super that comes from your employer’s compulsory contributions.

The main benefit of the FHSS is the tax savings that can be made since the money you deposit into your super fund is generally only taxed at 15%.

Different types of super contributions get taxed differently, and there are yearly limits for how much extra you can put in – visit the ATO for more information.

You should only consider the FHSS scheme if you’re confident you’ll want to buy a home.

It’s one of the only reasons you’re able to withdraw from your super before you reach preservation age, which is currently 65.

This means, if you change your mind, your voluntary contributions will remain in your super account until you can legally access them for other reasons, which are limited.

You’re only allowed to use the scheme once.

The impact of using your super to pay for your home deposit via the FHSS will depend on your personal circumstances. 

Some people on lower incomes (and therefore on the lowest tax bracket) may find that the tax advantages are minimal, while the higher your income, the greater your savings may be because there’s a bigger gap between the higher income tax rate and the tax on super contributions.

Example
In 2023, if you’re earning say $80,000, your upper tax rate of 32.5% plus 2% Medicare levy equals 34.5%. But if you contribute $15,000 of that to your super, it’ll only be taxed at 15% and you end up saving $2,925.

Good news

Spaceship Super supports FHSS, because we really want to see our members own their own home if that’s a goal of theirs.

1. Check you’re eligible for the FHSS – are you 18 years old or over and a first home buyer? There’s no Australian citizenship or residency requirement to apply.
2. Check that your super fund allows you to withdraw under the FHSS (Spaceship Super does!)
3. Start out by contributing to your own super in any of the following ways:
   1. Contribute after-tax money to your super and then a claim tax deduction in your tax return.
   2. Salary sacrifice, by asking your employer’s payroll department to send some of your income directly to your super account instead of to you.
   3. Contribute after-tax money to your super account, without claiming a tax deduction.
   • Options a and b count towards your ‘concessional contributions’ annual cap of $27,500 (including your employer contributions) and come with tax savings.
   • Option c counts towards your ‘non-concessional’ annual cap of $110,000.
   • There’s a $15,000 cap on how much you can save via the FHSS each year. 
4. Think financial years. Your annual limits reset on 1 July every year. 
5. When it comes time to start looking for a home, you apply for a FHSS Determination and a release from the ATO.
   Make sure you get the determination before you sign a contract, so you know how much you’re able to withdraw as a deposit.
   Much of the information will be pre-filled, but it will be handy to have a record of your contributions on hand just to check.
6. Buy your property!
   Once you sign a contract, submit an FHSS Release Request.
   The ATO requires this within 14 days of signing the contract, but it’s best to do it straight away.
   The amount you withdraw via FHSS will be paid into your bank account. In most cases it will take between 15 to 25 business days.
7. Alternatively, you can submit the Release Request before signing a contract.
   If you do this, you have up to 24 months (an initial 12 months and an automatic 12-month extension if you need it) to sign a contract on your first home.
   If more than one person is buying the home, each person can use their own FHSS as long as they meet the criteria.
   Even if one person is not eligible, other eligible buyers can still apply for the FHSS.

There are some limits on how much you can contribute each year under the FHSS.

An individual can withdraw up to $15,000 per year of contributions and the maximum in total is $50,000.

These numbers double for a couple.

$50,000 (if you have contributed that much) or $100,000 for couples, plus the associated earnings on your investment.

100% of your eligible personal voluntary non-concessional contributions and 85% of your before-tax contributions will be released, so that there is some money left over to meet normal super tax obligations.

Most super is for the long term, but FHSS has a shorter term objective – buying your first home.

The Commonwealth Government understands the difference, and so FHSS returns, (known as associated earnings) are calculated by the ATO using an official estimate of earnings, and not your super fund’s investment returns.

At the start of 2023, the deemed rate of return was higher than the interest being paid by most deposit accounts and even term deposits.

You can visit the ATO for more information about the FHSS to make sure you understand what you’re getting yourself into. If you’re still unsure, consider seeking independent financial advice from a professional such as from a tax agent or financial advisor.