Guide to the First Home Super Saver Scheme

Are you a first home buyer intrigued by the Australian Federal Government’s First Home Super Saver Scheme (FHSS)? The scheme has been running since July 2017, and it’s designed to help Aussies like you achieve your homeownership dreams sooner by allowing you to build your home deposit inside your super. 

The FHSS scheme got a boost in the 2021/22 Federal Budget with the Government announcing it would increase the maximum releasable amount up to $50,000 (currently $30,000)

Whether you’re a young Aussie squirrelling away your money for a first home loan deposit or have simply spent too many years renting while paying off your landlord’s mortgage, we'll run you through how the FHSS scheme can help you get a foot in the property door sooner rather than later...

First Home Super Saver Scheme

Saving for your first home is no easy task - not only do you have the home loan deposit to save up for but there’s also the cost of lenders mortgage insurance, stamp duty (unless you’re eligible for exemption in your state) and upfront mortgage fees.

So it’s easy to see why the Australian Government has attempted to fix housing affordability by introducing the First Home Super Saver Scheme. As a first home buyer you can:

• Opt in to the scheme with the Australian Taxation Office (ATO). Then you’ll have the ability to...
• Sacrifice up to $15k of your salary each year, which for instance your employer will then transfer into your super account on top of the 9.5% compulsory super contributions each time you get paid. Instead of being taxed at the marginal tax rate that usually applies to your salary, all funds saved through the scheme will only be taxed at 15%.
• Withdraw your savings once they’ve hit the $50k cap (which will get taxed 30% below the marginal tax rate that applies to your income bracket). This cap was increased from $30k as part of the 2021/22 Federal Budget, and includes all voluntary contributions you've made under the scheme since July 2017.

Sounds pretty good right? Let’s see if it’s really all it’s cracked up to be, by running through the positives and negatives below…

Pros of the First Home Super Saver Scheme

• Couples are eligible to participate, meaning they can make extra super contributions individually, then withdraw the funds later and roll them into the one home loan deposit.
• No new or separate account is required, provided your super account is up and running as required by law for all Aussie workers (apart from sole traders or small business owners).
• You’ll save more than you would putting cash in a savings account,  especially given how low ongoing savings rates have fallen over the past year (the average in the Mozo database sits at just 0.44% at the time of writing). Plus you can take advantage of compound interest and tax concessions with any money you put into super.

Cons of the FHSS Scheme

• Depending on the type of property you’re looking to purchase and the area you live in, $50k probably won’t provide you with a large enough deposit to buy a home which means you’ll most likely need to boost it with additional savings.
• Once you withdraw the money you've saved through the Super Saver Scheme, you've got 12 months to sign up to buy or build a home, which means you'll likely have to be saving these extra funds at the same time.
• If you don't buy a home in that 12 months, you can put the savings back in your super account, apply for another 12 month extension, or if you want to, keep it in your savings account. But remember if you opt for the last option, you'll have to pay a tax of 20% of the assessable amount you saved through the FHSS scheme.

Am I eligible for the FHSS scheme? 

You can start making voluntary super contributions at any age, but you must be at least 18 years old before you can request for those funds to be released under the FHSS scheme.

Other FHSS scheme requirements include: 

• You've never owned any kind of property (including owner occupied, investment, commercial or vacant land) in Australia. That is, the funds are used to purchase your first home.
• You live or intend to live in the property you're purchasing as soon as it's practicable, and this must be for at least six of the first 12 months from settlement. In other words, you're an owner occupier.
• You purchase a property within 12 months of applying for a request for release, although you can request the ATO to extend this by another 12 months if needed.
• You have not previously received a FHSS payment. 

To find out more about the First Home Super Saver Scheme visit the ATO website. Also check to see if you're eligible for other first home buyer schemes, such as the First Home Owner Grant and the First Home Loan Deposit Scheme.

Home loan approval tips for first home buyers

While taking the first step and saving for your home deposit (and other property buying costs) may be exciting, when you get there you still have to convince the banks that you’re worthy of a home loan. So make sure you:

1. Can show genuine savings. When you apply for a home loan, the lender will want to see that you have 'genuine savings' by looking at least 3 months worth of your most recent bank statements. The benefit of a good savings history is it shows the bank that you’re more than capable of repaying the home loan.

2. Don’t job hop. Unless absolutely necessary, it’s a good idea to stay with your current employer, so you can show the lender you have a stable income and are not a risky borrower.

3. Check your credit score. It’s easy to receive a copy of your credit score these days, as there are several online credit reporting providers which allow you to access a copy of your credit report once a year for free. When you download your report, make sure you look out for any errors, and get them removed from your file before applying for a home loan.