It just got easier to use your super to buy a house

For many Australians, the family home is not only where the heart is, it may also be the biggest asset you’ll ever own. But with rising house prices, the dream of home ownership can seem a long way off. 

Did you know you may be able to take advantage of the tax benefits of super to help save for the deposit on your first home through the First Home Super Saver (FHSS) scheme? 

And, thanks to legislative changes that will come into effect this month, accessing your super under the FHSS just got a little easier. 

The government introduced the FHSS scheme in July 2017 to help Australians save a deposit to buy their first home. 

Under the scheme, you can make eligible voluntary contributions to super, and then access that money (plus an associated earnings amount) to buy or build your first home.

On 15 September 2024, several changes to the FHSS scheme will come into effect, making it easier for first home buyers to access their savings and correct any errors in their applications. 

If you request the release of your funds, then go looking for a home, you won’t be affected by these changes, except you will have a longer period of 90 days (rather than 28 days) to notify the ATO after entering the contract to buy a home.  

But if you want to find your home first, sign the contract, pay the deposit with your available funds, then make a release request (for example, to help fund the payment required at settlement), you are not eligible to apply for a FHSS payment under the old rules but will be able to do so under the new rules.  

Key changes include:

• More access: if you’ve already entered into a contract to buy your first home, but are not yet the legal owner, you’ll now be able to request an FHSS determination. Previously you had to request a determination before signing the contract.  
• More time: if you’ve already applied for an FHSS determination and entered into a contract to purchase or build your first home, you’ll have up to 90 days to request the release of your funds under the FHSS scheme. Previously this period was limited to 14 days. Further, you will have up to 90 days instead of 28 days to notify the ATO that you have entered into the purchase contract.  
  
• More flexibility: users of the scheme will now be able to amend or revoke requests for FHSS determinations and releases.
  
  In addition, if you previously tried to access the scheme but weren’t successful, you may now be eligible to have an amount released. The Australian Tax Office (ATO) will assess past applicants to see if they are now eligible.

You can apply to access eligible voluntary contributions you’ve made since 1 July 2017 up to a maximum of $15,000 per financial year, and up to a total of $50,000 per person. 

If you’re buying a house as part of a couple, each person can apply to access eligible contributions under the scheme, which means together, you can access up to $100,000, plus associated earnings. The ATO will withhold tax and pay the net amount to you. If you wish to withdraw under the scheme, you need to request a FHSS determination from the ATO, followed by a request for the ATO to release your contributions and earnings. 

Eligible voluntary contributions include personal after-tax (non-concessional) or pre-tax (concessional) contributions, and non-mandated employer contributions such as salary sacrifice. 

• Salary sacrifice contributions you set up with your employer in addition to the Superannuation Guarantee payments your employer makes to your super fund 
• Tax-deductible contributions made using after-tax dollars (which you can then claim a deduction for at tax-time) 
  
• Personal contributions made using after-tax dollars that aren’t tax-deductible. 
  

• Compulsory super contributions your employer is required to pay you under the Superannuation Guarantee

• Spouse contributions your partner may pay into your super fund.

It’s important to note that the current contribution caps still apply, although there are some instances where you may be able to make contributions above the standard concessional and non-concessional contributions caps.  

The key benefit of using the FHSS scheme to save a first home deposit is that you could end up paying less tax as you save, meaning your savings will grow faster. This happens in two ways:

• Earnings in super are taxed at a maximum of 15% , while earnings outside super are taxed at your marginal tax rate 
• Pre-tax super contributions such as salary sacrifice are also only taxed at a maximum of 15%, and you’ll reduce your total taxable income by the amount you salary sacrifice to super within your concessional contributions cap, which in some cases could end up reducing your income tax liability outside super if your marginal tax rate is higher than 15%. 

When you withdraw money that you made as a concessional contribution (e.g. salary sacrifice contributions), only 85% of these contributions can be released to you. This is because the super fund has paid 15% tax on these contributions. Further, the ATO is required to deduct tax from the concessional contributions and associated earnings amount that can be released to you, based on your marginal tax rate. However, the actual tax payable won’t be as high as your marginal tax rate due to a 30% tax offset that can apply. 

When you withdraw money that you made as a non-concessional contribution (e.g. a personal contribution that you didn’t claim a tax deduction for), the ATO won’t deduct tax from the amount they pay to you as you have already paid tax on that money. 

Find out more about who is eligible to access funds, and the exact steps you’ll need to take to apply to access your super under the scheme in our guide to the First Home Super Saver scheme. 

 
Additional rules may apply, so check the FHSS scheme page on the ATO website before making any decisions.  

You may also want to check your state or territory’s First Home Owner Grant information to see what else you may be eligible for.