Can I Access My Super to Buy a House?

The First Home Super Saver (FHSS) Scheme allows eligible individuals to use voluntary contributions made into their superannuation fund to save for a first home deposit. This government initiative helps first-time homebuyers leverage the tax environment of superannuation for homeownership goals.

Overview of the First Home Super Saver Scheme

The First Home Super Saver Scheme assists first-time homebuyers in accumulating a deposit more efficiently within the superannuation system. It channels personal voluntary contributions into a designated savings avenue, allowing individuals to benefit from the concessional tax treatment of superannuation. The scheme aims to accelerate the savings process for a residential property.

To qualify, individuals must be 18 years or older when they request the release of their funds. They must not have previously owned any real property in Australia, including investment properties or vacant land, unless ownership was lost due to specific financial hardship. Participants also cannot have made a previous request to release funds under the FHSS Scheme.

Individuals must plan to live in the home they purchase as soon as practical, for a minimum of six months within the first 12 months of ownership. The property acquired must be a residential dwelling in Australia, though vacant land intended for construction can qualify.

The scheme offers benefits primarily through the tax advantages of saving within the superannuation environment. Voluntary concessional contributions, such as those made through salary sacrifice, are taxed at 15% within the super fund, which can be less than an individual’s marginal income tax rate. Participants can also access associated earnings calculated on their eligible contributions, based on a deemed rate set by the tax office.

Contributing to the Scheme

Only personal voluntary contributions qualify for the FHSS Scheme; mandatory employer Super Guarantee contributions do not count. These voluntary contributions can be either concessional (before-tax) or non-concessional (after-tax).

Concessional contributions include amounts contributed through salary sacrifice arrangements with an employer or personal contributions for which a tax deduction is claimed. These contributions are taxed at 15% when they enter the super fund. Non-concessional contributions are personal contributions made from after-tax income, for which no tax deduction is claimed.

Individuals can contribute up to $15,000 in any single financial year towards the scheme, with an overall lifetime limit of $50,000 in eligible contributions across all financial years. These FHSS-specific limits operate within the broader annual superannuation contribution caps. For example, the general concessional contributions cap is $30,000 per financial year, and the non-concessional contributions cap is $120,000.

Contributions can be made via salary sacrificing or direct personal contributions. If claiming a tax deduction for personal contributions, a “notice of intent to claim a tax deduction” must be lodged with the super fund before requesting an FHSS determination from the tax office. Only voluntary contributions made from July 1, 2017, onwards are eligible for the scheme.

Requesting and Using Your FHSS Release

To request funds, apply for an FHSS determination through the online services portal. This determination indicates the maximum amount that can be released and must be obtained before signing any contract to purchase or construct a home.

The assessable FHSS amount includes 100% of eligible non-concessional (after-tax) contributions and 85% of eligible concessional (before-tax) contributions. A deemed amount of associated earnings on these contributions is also included, calculated by the tax authority based on a specific interest rate. The maximum amount that can be released is capped at $15,000 from contributions in any one financial year, with a total lifetime limit of $50,000, plus the associated deemed earnings.

After receiving a determination, a request to release the funds can be submitted through the same online portal. It takes between 15 and 20 business days for funds to be released from the super fund and paid to the individual’s nominated bank account. This processing time should be considered when planning home buying activities.

Upon receiving released funds, conditions apply to their use. The individual must sign a contract to purchase or construct a qualifying residential property within 12 months of the release request date. An extension of an additional 12 months, for a total of 24 months, can be granted by the tax authority.

Within 28 days of signing the contract (or 90 days for determinations made on or after September 15, 2024), the tax authority must be notified. If these conditions are not met, or if the individual chooses not to purchase a home, the released amount must either be recontributed to the super fund as a non-concessional contribution or be subject to a specific FHSS tax.

Tax Considerations for FHSS Participants

When voluntary concessional contributions are made to a superannuation fund, they are generally taxed at a flat rate of 15% within the fund. This tax rate is often lower than an individual’s marginal income tax rate, providing a tax benefit on the contributions. Non-concessional contributions, made from after-tax income, are not subject to further tax when they enter the super fund, as they have already been taxed at the individual’s marginal rate.

Upon the release of funds from the FHSS Scheme, the assessable FHSS amount is included in the individual’s assessable income for the financial year the release request is made. To offset this, a 30% tax offset is applied to the assessable amount.

If the conditions for using the released funds to purchase a home are not met within the specified timeframe, different tax consequences arise. If the individual decides to keep the released funds without purchasing a home, an FHSS tax is levied. This tax is equal to 20% of the assessable FHSS released amount. Alternatively, the individual can choose to recontribute the assessable FHSS amount (less any tax already withheld) back into their super fund as a non-concessional contribution, avoiding the additional FHSS tax.

The benefits derived from the FHSS Scheme are primarily through its tax-advantaged savings structure. These tax benefits are distinct from other government assistance programs for first-time homebuyers, such as grants or stamp duty concessions, which operate under separate legislative frameworks. While the FHSS Scheme provides a tax-efficient way to save for a deposit, it does not directly interact with or replace these other state or territory-based incentives. Individuals may be able to utilize both the FHSS Scheme and other applicable first home buyer benefits, depending on their specific circumstances and eligibility for each program.