The First Home Super Saver (FHSS) scheme was introduced in July 2017, with eligible people able to access certain superannuation contributions from 1 July 2018.
The scheme was designed to help Australian first home buyers enter the housing market by allowing access to certain superannuation contributions and their associated earnings.
Several enhancements have been made to the scheme since it was introduced.
In general terms, the scheme allows eligible first home buyers to withdraw voluntary contributions made to super since 1 July 2017, along with the associated earnings on those contributions.
Voluntary contributions generally include all personal contributions a person makes to super. This includes personal tax-deductible contributions, contributions made under a salary sacrifice arrangement (where salary is foregone in return for an employer making additional contributions), and non-concessional contributions. Non-concessional contributions are personal contributions made from “after-tax” income. Mandated employer contributions, including Superannuation Guarantee contributions, cannot be accessed under the FHSSs.
When applying for the release of super, up to $15,000 of annual contributions may be released. Up to 100% of non-concessional contributions and up to 85% of personal tax-deductible and salary sacrificed contributions can be released (i.e., a maximum of $12,750 per annum).
The maximum contributions that can be released under the FHSSs is $50,000.
In addition to accessing contributions, the associated earnings on the contributions can be released.
However, the associated earnings are not based on the actual investment earnings achieved on the contributions. When requesting a FHSS determination, the Australian Taxation Office (ATO) will calculate the associated earnings based on a formula set out in legislation.
When seeking to access superannuation under the FHSS scheme, the first step is to request a FHSS determination. This can be requested through an individual’s My.Gov account. The determination sets out the amount that can be released under the scheme. A person can apply for as many determinations as they wish.
When seeking to have superannuation released under the scheme, an application is made to the ATO to issue a release authority. Only one release authority can be lodged.
The released amount is paid to the ATO by the super fund, which will then deduct tax, if applicable, and will forward the balance to the individual.
While any non-concessional contributions withdrawn are not taxable, the associated earnings and any personal tax-deductible and salary sacrificed contributions are taxed at the individual’s marginal tax rate, less a 30% tax offset.
When planning to withdraw contributions from superannuation, the amount withdrawn must be applied to the purchase or construction of a home within 12 months. The individual must occupy the home as their main residence for at least six months in the first 12 months of ownership. Release of funds may also be requested within 14 days of having signed a contract to purchase or construct a first home. However, from September 2024, this will be extended to 90 days.
If a home is not purchased within 12 months, the funds released can be recontributed to super. If not recontributed, additional tax is payable.
To be eligible to withdraw money from super under the FHSS scheme, a person must:
- Not have owned property in Australia previously,
- Be aged 18 or older; and
- Not previously had an amount released from super under the scheme.
Being able to access super to contribute towards the purchase of a first home is a strategy that may be attractive to many first home buyers. However, like most things, the devil is in the details. Whether this is an appropriate strategy will depend on personal circumstances.