FHSS Scheme at a Glance
What: Save for a home deposit inside super at concessional tax rates | Annual limit: $15,000 per financial year | Total limit: $50,000 lifetime | Tax rate in super: 15% (vs your marginal rate) | Who runs it: ATO
Saving a home deposit in Australia takes years — and every dollar you set aside in a bank account is taxed at your full marginal rate first. The First Home Super Saver (FHSS) Scheme is the federal government's answer to this: it lets first home buyers save up to $50,000 for a deposit inside their superannuation fund, where contributions are taxed at just 15% instead of their top marginal rate. Contributions have been eligible since 1 July 2017, with releases available from 2018. The cap was doubled to $50,000 in 2022 — yet it remains one of the most underused first home buyer strategies in the country. Here's a complete guide to how it works, who qualifies, and whether it's worth doing.
What Is the FHSS Scheme?
The First Home Super Saver Scheme, administered by the ATO, allows eligible Australians to make voluntary superannuation contributions specifically for the purpose of saving a home deposit. When you're ready to buy, you apply to the ATO to have those contributions — plus associated earnings — released and used as a deposit.
The advantage is purely tax-based. Money you contribute voluntarily to super via salary sacrifice is taxed at 15% as it enters the fund — not at your marginal rate (which can be 19%, 32.5%, 37%, or 45% depending on your income). That gap is your saving. For most working Australians, it's worth thousands of dollars per year.
Important distinction: Your compulsory employer superannuation contributions (the 12% Super Guarantee) do not count towards the FHSS scheme. Only voluntary contributions — salary sacrifice or personal after-tax contributions you choose to make — are eligible.
Who Is Eligible?
To use the FHSS scheme, you must meet all of the following criteria at the time you request a release:
- You are 18 years or older
- You have never previously owned real property in Australia — this includes investment properties, not just homes you've lived in. The ATO defines "real property" broadly: land and any buildings on it
- You have never previously made an FHSS release request (you only get one release in a lifetime)
- You intend to live in the property for at least 6 months of the first 12 months you own it
If you have previously owned property but lost it in financial hardship (such as bankruptcy), the ATO has a hardship exemption process — speak to a tax agent or financial adviser about this.
Each person in a couple can use the scheme independently. So two first home buyers purchasing together can each release up to $50,000 — a combined maximum of $100,000 for a couple.
How Much Can You Save?
The limits are:
- $15,000 per financial year (1 July – 30 June) in eligible voluntary contributions
- $50,000 lifetime maximum across all financial years
- At the maximum over 3+ years: up to $50,000 in contributions, plus associated earnings calculated by the ATO at the Shortfall Interest Charge (SIC) rate — typically adding $4,000–$7,000 depending on the period and current rate. Use the ATO's FHSS estimator for a more accurate figure.
Important: If your contributions are concessional (salary sacrifice), only 85% of the contribution amount is included in the release calculation — because 15% contributions tax has already been paid inside the fund. For example, $50,000 in concessional contributions results in a release of $42,500, plus deemed earnings. Non-concessional (after-tax) contributions are released at 100%.
You don't have to contribute $15,000 in a single year. The scheme accumulates across financial years — so you could contribute $10,000 in year one, $15,000 in year two, and $15,000 in year three for a $40,000 base, plus earnings.
The Tax Saving: A Worked Example
This is where the scheme delivers real dollars. The benefit depends on your marginal tax rate — the higher your income, the bigger the gain.
Scenario: $60,000 salary, saving $15,000 per year
| Bank account (after tax) | FHSS via salary sacrifice | |
|---|---|---|
| Gross amount directed to saving | $15,000 | $15,000 |
| Tax rate applied | 34.5% (32.5% + 2% Medicare Levy) | 15% contributions tax |
| Tax paid | $5,175 | $2,250 |
| Net amount retained | $9,825 | $12,750 |
Tax saving per year: approximately $2,925 (including Medicare Levy). Over 3 years at $15,000 per year: approximately $8,775 more retained going in, before accounting for release tax and the 85% concessional release rule — see note above.
There is also a tax implication when the money is released. The assessable amount (contributions plus deemed earnings) is taxed at your marginal rate, but you receive a 30% tax offset that significantly reduces what you actually owe. For most people in the 32.5% marginal tax bracket, this results in an effective release tax rate well below 20%. The ATO withholds 17% when it releases your funds, and you reconcile the exact figure — often receiving a partial refund — in your tax return for that year.
The net result for most middle-income earners: the FHSS scheme adds a meaningful amount to what you can accumulate over three years compared with saving the same amount in a standard bank account — through the tax differential going in, net of the tax payable on release (partially offset by the 30% tax offset). Use the ATO's FHSS estimator to model your specific situation.
What Are the Two Types of Contributions?
You can make FHSS-eligible contributions in two ways:
1. Concessional Contributions (Pre-Tax / Salary Sacrifice)
You ask your employer to redirect a portion of your pre-tax salary into super instead of paying it to you as income. The contribution is taxed at 15% as it enters the fund. This is the most tax-effective route — you save the full gap between your marginal rate and 15% — and it's the most common way people use the FHSS scheme.
Self-employed? You can make personal concessional contributions and claim a tax deduction on them. You'll need to lodge a "Notice of Intent to Claim a Deduction" with your super fund before your tax return is submitted.
2. Non-Concessional Contributions (After-Tax)
You contribute money you've already paid income tax on — directly from your bank account into your super fund. These come out of super tax-free under the FHSS scheme (since you've already paid tax on them). The tax benefit going in is smaller, but you still receive the associated deemed earnings when the funds are released.
Non-concessional contributions count towards the FHSS $15,000 annual and $50,000 lifetime limits. They also count towards the standard non-concessional contribution cap — so you need to ensure your total super contributions don't exceed the relevant caps.
Step-by-Step: How the FHSS Process Works
- Start making voluntary contributions. Set up salary sacrifice through your employer's payroll system, or make personal after-tax contributions directly to your super fund. Contributions count in the financial year they are received by the fund.
- Track your eligible contributions. The ATO records these through your annual tax return and your super fund's reporting. Keep records of every voluntary contribution you intend to use for FHSS.
- Apply for an FHSS determination. Before requesting a release, ask the ATO for an "FHSS determination" — a formal calculation of your eligible release amount. You do this through myGov (ATO online services). This step confirms your eligibility and the maximum you can withdraw.
- Request a release. Once you have your determination and are genuinely ready to buy, submit a release request through myGov. This step is irreversible. Once the ATO processes your release request, the 12-month clock to sign a contract begins — note that ATO processing takes 15–20 business days, so the clock starts after that period, not at the moment you submit.
- Receive your funds. The ATO contacts your super fund, which releases the eligible amount. The ATO then pays you the funds after withholding 17% tax. Allow 15–20 business days from requesting release to receiving money in your account.
- Sign a contract within 12 months. You must sign a contract to purchase or construct a qualifying residential property within 12 months of your release date. If you need more time, you can apply to the ATO to extend this to 24 months. If you still cannot proceed, you must either recontribute the released amount to super or pay an additional 20% FHSS tax on it.
- Reconcile in your tax return. In the financial year you receive the release, include the assessable FHSS amount in your tax return. The 30% tax offset is applied at this stage — for most people in the 32.5% bracket, this results in a refund of some or all of the 17% withheld.
Important Rules and Common Traps
Employer SG contributions don't count
Your employer's compulsory 12% Super Guarantee contributions are not eligible for the FHSS scheme. Only additional voluntary contributions you choose to make on top of this are counted. This is the most common source of confusion about the scheme.
You can only use this once
There is no second FHSS release. Once you request a release, that's it — whether or not you end up buying. Choose your timing carefully and only submit a release request when you are genuinely ready to proceed with a purchase.
The 12-month deadline is strict
Don't request a release speculatively. From the date the ATO processes your request, you have 12 months to exchange contracts on a property. If you're still 6–12 months away from being ready to buy, keep contributing and wait.
Allow enough lead time before settlement
The ATO's release process takes 15–20 business days. Do not plan on using FHSS funds at auction, or assume the money will arrive quickly. Request your release well before you need the funds — at least 4–6 weeks before exchange or settlement.
The release amount is not simply $50,000 plus earnings
For concessional (salary sacrifice) contributions, the ATO releases 85% of the eligible contribution amount — because 15% contributions tax has already been paid inside the fund. Someone who contributes $50,000 via salary sacrifice will have a release from contributions of $42,500, not $50,000. Deemed earnings at the SIC rate are added on top of this. Non-concessional (after-tax) contributions are released at 100% of the amount contributed, with deemed earnings added.
Using FHSS Alongside Other First Home Buyer Schemes
The FHSS scheme is a savings mechanism — it determines how you accumulate your deposit, not how you borrow. This means it sits cleanly alongside every other first home buyer measure available in Australia:
| Scheme | What it does | Compatible with FHSS? |
|---|---|---|
| First Home Guarantee | Buy with 5% deposit, government guarantees the rest — no LMI | Yes |
| NSW First Home Buyer Grants | Up to $10,000 for new builds; stamp duty exemptions for eligible buyers | Yes |
| Help to Buy | Government co-owns up to 40% of the property, reducing your loan size | Yes |
| Guarantor loan | A family member uses their equity to help you avoid LMI | Yes |
A common combination: use FHSS to build your deposit over 2–3 years, then apply the First Home Guarantee so you only need 5% to proceed — no LMI, no government co-ownership.
Is the FHSS Scheme Worth It?
For most first home buyers who are 2–4 years from purchasing, the answer is yes. The tax saving is real, the process is manageable through myGov, and for a couple each maximising the scheme the combined benefit over three years can exceed $15,000 compared with saving the same amounts in a bank account.
The scheme is less useful if:
- You're buying in the next 6–12 months and don't have time to accumulate meaningful contributions
- Your income is low enough that your marginal rate is already close to 15% — the tax advantage shrinks significantly
- You are uncomfortable with money being temporarily inaccessible inside super
The scheme is most valuable if:
- You have 2 or more years before you plan to buy
- You're earning above $45,000 (32.5% marginal rate bracket) or higher
- You're buying as a couple — each partner can independently access up to $50,000
- You plan to combine it with the First Home Guarantee to minimise LMI and stretch your deposit further
Act Before 30 June 2026
The $15,000 annual limit applies per financial year and cannot be carried forward — unused amounts from a prior year are lost. The current financial year ends 30 June 2026. If you're thinking about starting the FHSS scheme, any contributions you make before that date will count towards your 2025–26 total. Even a partial contribution this year uses the current year's allowance.
Setting up salary sacrifice now — even with a few weeks left in the financial year — starts the clock and gives you a full $15,000 allowance in 2026–27.
Written by Amit Narang, Mortgage Broker | Credit Representative 558902 of Outsource Financial Pty Ltd (ACL 384324)
Sources: ATO, "First Home Super Saver Scheme"; ATO, "FHSS Scheme — Frequently Asked Questions"; ASIC MoneySmart, "First Home Super Saver Scheme"; Treasury Laws Amendment (2022 Measures No. 2) Act 2022 (cap increase from $30,000 to $50,000).
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