Saving enough money for deposit can be one of the biggest challenges for first home buyers. To help you get into your own home sooner, you might be able to access some of your super.
The First Home Super Saver scheme allows you to make voluntary contributions to your super to help save a deposit for your first home.
You can withdraw this amount, plus investment earnings when you are ready to buy a home.
Key points
- You can contribute up to $15,000 each financial year to reach $50,000.
- You can contribute up to $50,000, and then withdraw this when you are ready to buy your first home.
- You need to meet the government’s criteria to qualify for the First Home Super Saver scheme.
- Any before-tax money you put into super is taxed at 15%. This could be lower than the maximum tax rate for your income.
The benefits of using the First Home Super Saver
The scheme can help you reach your deposit goals much sooner. This is because it taps into super’s tax breaks, making it easier to save.
Making extra voluntary before-tax contributions can also help reduce the tax you pay on your income. This means you keep more of your money. And because it’s in your super, you can’t dip into it until you’re ready to buy your first home.
How to qualify for the First Home Super Saver scheme
To access some of your super early as part of the scheme, you need to meet these government conditions.
- you are 18 years old
- you haven’t owned a property in Australia
- you intend to live in the property for at least six months in the first year
- you haven’t applied to have funds released from your super through the First Home Super Saver Scheme before.
If you’ve lost ownership of your home due to financial hardship, you might be able to apply for the First Home Super Saver scheme. Hardship includes losing ownership due to:
- bankruptcy
- separation from your partner
- losing your job
- sickness
- natural disaster.
How the First Home Super Saver scheme works
The scheme lets you make extra voluntary super contributions to save for your first home. You can later withdraw the money, plus investment earnings on the deposited amount, to help pay for your first home. The money you contribute to your super grows based on the super investment mix you’ve chosen.
The scheme can also offer significant tax and financial benefits:
| First Home Super Scheme advantages | Benefit to you |
|---|---|
| The money in super can’t be touched until you’re ready to use it for a deposit. | This removes the temptation to dip into your savings. |
| The money you deposit into a bank account could be taxed at a higher rate, up to 47%. Contributions to super are usually taxed at 15%. | This means your money can go a lot further and stays invested in the markets. |
Assumptions:
- Income earners are in the 34.5% marginal tax bracket. This rate includes the Medicare levy.
- All numbers presented are in real terms, in today’s dollars (2022).
- Contributions and the related asset fee happens midyear.
- The cash rate is based on a short term rate of 3.18% over the next 5 years (2022-2027).
- The only fee charged is the asset-based fee, the member fee has not been included.
- Member contributions are invested in the MySuper Lifecycle.
- Member’s age is 30.
Assumptions
$15,000 of concessional contributions
How much you can contribute
There are rules on the amount of money you can contribute each year and the type of contributions.
- You contribute up to $15,000 per year to the First Home Super Saver Scheme to a total amount of $50,000.
- Your contributions must be voluntary contributions. This means the compulsory super your employer pays you, called the super guarantee, can't be used for the First Home Super Saver Scheme.
- Voluntary contributions can include:
- before-tax contributions such as salary sacrifice.
- after-tax contributions where you deposit extra money directly into your super account.
- There are limits to how much you can contribute. The before-tax contribution limit is $27,500 per financial year. This includes the Super Guarantee paid by your employer. This limit also applies if you claim a tax deduction for personal contributions made. The after-tax contribution limit is $110,000 per financial year. Extra tax may apply if you exceed these limits.
It’s simple to set up a salary sacrifice or make an after-tax contribution to your super
How much you can withdraw
- You can only withdraw a lump sum, once.
- You can withdraw 100% of your after-tax contributions
- You can withdraw 85% of before-tax contributions. This is because the fund taxes your before-tax contributions at the super contribution tax rate of 15%.
- The money you withdraw also includes the investment earnings of the amounts you have contributed for the First Home Super Saver scheme
Case study: Let's see how it will work
Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she contributes $10,000 of pre-tax income into her super account each year, increasing her balance by $8,500 a year (after the 15% contributions tax). After three years, she can withdraw $26,449 she has saved, including expected investment earnings.
Her withdrawal is taxed at her marginal rate (including Medicare levy), less a 30% offset, leaving her with $25,259 that she can use for her house.
Michelle has saved around $5,840 more for her deposit by utilising the First Home Super Saver Scheme than if she saved in a standard deposit account.
Assumptions:
- Income earners are in the 34.5% marginal tax bracket. This rate includes the Medicare levy.
- All numbers presented are in real terms, in today’s dollars (2022).
- Contributions and the related asset fee happens midyear.
- The cash rate is based on a short term rate of 3.18% over the next 5 years (2022-2027).
- The only fee charged is the asset-based fee, the member fee has not been included.
- Member contributions are invested in the MySuper Lifecycle.
- Member’s age is 30.
What happens if my plans change, and I don't buy a home?
You’ll have up to 12 months to sign a contract to buy or build a property after release of your scheme funds. If you haven’t signed a contract within that time, you can:
- Get an extension up to 12 months
- Put the funds back into your super account
- Keep the funds, subject to a First Home Super Saver scheme tax equal to 20% of your assessable First Home amount, less any withheld tax.
How much tax you will pay
The First Home Super Saver scheme funds form part of your assessable income in your tax return for the year the money is released to you. The ATO will withhold tax equal to either your usual tax rate minus a 30% offset, or 17% if your usual tax rate can’t be calculated. Investment earnings on your super are also only taxed at 15%.
How do you get your money?
To access the First Home Super Saver scheme, follow these steps.
- Ensure you’re eligible and your super fund can release funds for the First Home Super Saver scheme amount.
- Make your extra voluntary contributions to your super fund.
- Apply to the ATO through your MyGov account to request your Determination.The ATO will tell you how much money you can withdraw from your super for the First Home Super Saver Scheme. This is called a Determination. You need to have this Determination before you sign your contract.
- Request a First Home Super Saver scheme release authority from the ATO. The ATO will instruct Aware Super to release your funds to them. Once they have deducted any applicable tax, the ATO will pay the money to you.
- You have 12 months from the day you request a release request to tell the ATO you have signed a contract to buy a house. If you don't, you will need to return the money to your super. If you decide to not go ahead with buying a home, or don’t sign a contract within 12 months, you may:
- be able to keep the funds. This is subject to a tax equal to 20% of your assessable First Home amount, less any withheld tax, or
- re-contribute the assessable First Home Super Saver scheme amount into super, less any withheld tax.
- The scheme funds form part of your assessable income in your tax return for the year the money is released to you.