Saving for a first home deposit is one of the biggest financial hurdles for Australians. The First Home Super Saver (FHSS) scheme offers a tax-effective way to build your deposit using the superannuation system—helping you potentially enter the property market sooner.

What is the FHSS Scheme?

The FHSS scheme allows eligible first-home buyers to make voluntary contributions to their superannuation—either concessional (before-tax) or non-concessional (after-tax)—and withdraw those contributions (plus deemed earnings) to purchase their first home.

The most tax-effective strategy is to make voluntary concessional contributions which are taxed at just 15% within super, instead of at your marginal tax rate.

These can be arranged through salary sacrifice with your employer or made as a personal contribution at year-end, with a corresponding tax deduction claimed.

Eligibility

To use the FHSS scheme:

  • You must be at least 18 years old.
  • You must have never owned property in Australia, including residential, investment, or vacant land (exceptions may apply in cases of financial hardship).
  • You must intend to live in the home for at least six months within the first 12 months of ownership.

How much can you save?

You can contribute up to $15,000 per financial year, capped at a lifetime limit of $50,000. This cap is per individual, so a couple could combine up to $100,000 in FHSS contributions.

Once inside super, the money is locked away until released through the scheme—effectively acting as forced savings. You should only contribute what you can afford beyond emergency savings.

What can you withdraw?

When you’re ready to buy, you can withdraw:

  • 85% of your concessional contributions (after allowing for 15% contributions tax),
  • Plus associated earnings, based on a formula set by the ATO (currently 7.17% per annum, not linked to your actual super fund performance).
  • Less tax withheld at your marginal tax rate, less a 30% FHSS tax offset.

Example

Let’s say you make $50,000 of voluntary concessional contributions for four years:

  • Year 1: $15,000
  • Year 2: $15,000
  • Year 3: $15,000
  • Year 4: $5,000

These are taxed at 15% when they enter your super, leaving $42,500 (i.e. 85% of $50,000) available for withdrawal plus deemed earnings less tax.

Keep in mind: to avoid Lenders Mortgage Insurance (LMI), most lenders require a 20% deposit unless you’re eligible for the Home Guarantee Scheme. Some lenders also waive LMI for professionals in medicine, law, and accounting—so it’s worth speaking with a mortgage broker to explore your options.

You may also be able to combine the FHSS with other schemes such as the First Home Buyer Assistance Scheme or the First Home Owner Grant, increasing your total deposit available.

Using the FHSS Scheme

  1. Request an FHSS Determination: Before signing a contract, apply via the ATO to determine your available withdrawal amount.
  2. Apply for Release: Once approved, funds are released within 15 to 25 business days.
  3. Timing: You must sign a contract to buy or build within 12 months of receiving funds, or you may need to return the funds to super or pay additional tax.

Other important considerations

  • Super Fund Participation: Not all super funds support the FHSS scheme, so check with your provider before making contributions.
  • Impact on Benefits: Your assessable income may temporarily increase in the year of withdrawal, which could affect eligibility for certain government benefits.
  • Land Restrictions: The FHSS can’t be used for vacant land unless the purchase contract includes construction—and you must not already own the land at the time of applying.

Is it right for you?

If you’re a disciplined saver planning to buy in the next few years, the FHSS scheme can help you grow your deposit faster while reducing your taxable income.

Speak with your financial adviser or super fund to ensure you understand the eligibility criteria, contribution limits, and timing. With careful planning, the FHSS could be the key to unlocking your first home sooner than expected.

Prue Cheeseman is a financial adviser of HLB Mann Judd Wealth Management (NSW) Pty Ltd (AFSL 526052) ABN 65 106 772 696. This article contains general advice which does not consider your particular circumstances. You should seek advice from HLB Mann Judd Wealth Management (NSW) who can consider if the strategies and products are right for you.