With property prices continuing to rise across Australia, many parents are looking for effective ways to help their children take their first step into the housing market.
One lesser-known but highly effective strategy is the First Home Super Saver Scheme (FHSSS) – a government initiative administered by the Australian Tax Office (ATO).
The scheme allows first-home buyers to save for a deposit inside their superannuation fund, benefiting from concessional tax treatment and potential investment growth within the superannuation environment. The result? A faster, smarter and more tax-effective path to home ownership.
Whether you’re a parent supporting your children or a young adult planning ahead, understanding how the FHSSS works and how to use it strategically can make a meaningful difference to your savings journey.
Below, we explain how the scheme operates, outline the potential tax advantages, and explore how families can use superannuation planning to help the next generation enter the property market sooner.
What Is The First Home Super Saver Scheme (FHSSS)?
The First Home Super Saver Scheme (FHSSS) allows eligible first-home buyers to make voluntary contributions into their super fund and later withdraw those funds, plus earnings, to use toward a home deposit.
The scheme aims to help Australians save faster by leveraging the tax benefits available within the superannuation system. According to the ATO, you can apply to withdraw up to $50,000 in eligible voluntary contributions, along with associated earnings, to buy your first home.
Here’s how it works:
- You can make voluntary contributions of up to $15,000 per financial year, and up to a total of $50,000 across all years.
- Contributions can be made as either:
- Concessional contributions, such as salary-sacrifice or personal deductible contributions (before-tax contributions); or
- Non-concessional contributions, made from after-tax income for which no tax deduction is claimed.
- Once aged 18 or over, you can apply to withdraw voluntary contributions, plus notional earnings (currently 6.61% as per the ATO), to use toward purchasing your first home.
While withdrawals cannot occur before age 18, contributions can start earlier, giving young Australians the opportunity to build savings well before they’re ready to buy.
Why Use Super To Save For A Home?
The main advantage of using the FHSSS lies in its tax efficiency.
Superannuation operates under a lower tax-rate environment, which can significantly boost savings compared with keeping funds in a regular bank account.
- Lower tax on contributions: Voluntary concessional contributions, such as a salary sacrifice, are taxed at only 15% when entering the fund – often much lower than most individuals’ marginal tax rate. This reduces overall tax payable and allows more income to be directed towards savings.
- Lower tax on investment earnings: Investment earnings inside super are also taxed at 15%, compared with marginal tax rates outside super (which can be as high as 47%). Over several years, this difference can have a meaningful impact on total savings growth.
- Favourable tax treatment on withdrawal: When funds are withdrawn under the FHSSS, the assessable portion is taxed at your marginal tax rate, but with a 30% tax offset applied. This further enhances the benefit and means you retain more of your savings for your deposit.
In short, using superannuation as a savings vehicle enables first-home buyers to accumulate their deposit faster and more efficiently than through conventional savings methods.
How Parents Can Help
Many parents wish to contribute to their children’s first-home purchase, and the FHSSS provides a structured way to do this within the existing super system.
- Contributions must come from your child’s account. Parents can give money to their children, which the children can then contribute to their own super fund. However, the ATO requires that the contribution originate from the child’s own bank account to qualify as an eligible voluntary contribution under the FHSSS. You cannot contribute directly on your child’s behalf.
- Contributions may be deductible. If your child is working and makes personal deductible (before-tax) contributions to their super fund, they can generally claim a tax deduction – effectively reducing taxable income while boosting their home deposit savings.
- Non-deductible contributions can still provide benefits. If your child chooses not to claim a deduction or contribute after-tax funds, they may still benefit from the Government co-contribution. Low and middle-income earners who make personal after-tax contributions may receive up to $500 from the Government. Note: however, that co-contributions cannot be withdrawn under the FHSSS, as they are not personal voluntary contributions.
- Applying to withdraw. When ready to buy, your child can apply through myGov to determine the maximum withdrawal amount. Once they receive the FHSSS determination from the ATO, they can request the release of up to that amount to use towards their home deposit. This process must be carefully timed; the ATO sets strict rules and deadlines for both applying and using released funds, so professional guidance is recommended to ensure everything runs smoothly.
Things To Keep In Mind
While the FHSSS offers excellent potential benefits, there are also some important considerations:
- Eligibility: The scheme is only available to individuals who have never owned property in Australia.
- Time limits: Once funds are released, you generally have 12 months to sign a contract to buy or build your first home (extensions may be available).
- Super fund rules: Not all super funds automatically support the FHSSS, so confirm eligibility before making contributions.
- Tax implications: If withdrawal amounts are not used for a first-home purchase, they are taxed at your marginal rate and must be recontributed to super.
Understanding these details early can help you and your child avoid pitfalls and make the most of the scheme’s advantages.
Wilson Pateras and Your Superannuation
The First Home Super Saver Scheme can be a smart, tax-effective strategy for helping the next generation step onto the property ladder. By combining strategic superannuation contributions with thoughtful financial planning, families can accelerate savings, reduce tax liabilities and support long-term financial security.
However, the FHSSS comes with specific eligibility requirements and timing rules set by the Australian Tax Office, so professional advice is essential before making contributions or withdrawal applications.
Get in touch with our team if you’d like to explore how to use the FHSSS or other ways to help your children achieve home ownership. Our financial advisers and accountants can guide you through the rules, calculate potential benefits and design a strategy tailored to your family’s goals.
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