Understanding the first home super saver scheme

As the Australian real estate market continues to surge, many first home buyers may feel overwhelmed and pressured to get their foot in the door as quickly as possible. The First Home Super Saver Scheme (FHSSS) is designed to ease some of that pressure by helping eligible first home buyers boost their deposit through the tax-efficient environment of superannuation.

How does the scheme work?

Under the scheme, you can make voluntary contributions to your super fund and, subject to eligibility, withdraw these amounts when purchasing your first home.

These contributions can be either concessional (before-tax) or non-concessional (after-tax). Voluntary concessional contributions include salary sacrifice amounts and personal after-tax contributions that you intend to claim as a deduction in your tax return. As concessional contributions are generally taxed at only 15% in your super fund, you can save on tax if your personal marginal tax rate is higher than 15%.

If you choose to make concessional contributions under the FHSSS, it’s important to stay within the annual concessional contributions cap, which is currently $30,000. Exceeding this cap can affect your ability to claim a tax deduction for the excess and may result in additional tax.

Additionally, if you’re a high-income earner, you should be mindful of Division 293 tax. This can apply if your annual income, plus concessional super contributions for Division 293 purposes, exceeds the ATO’s $250,000 threshold. In that case, an additional 15% tax may be charged on some or all your concessional super contributions, reducing the overall tax benefit of this strategy.

Since 1 July 2017, the maximum contributions you can release from your super fund under the FHSSS is $50,000, with a contribution cap of $15,000 per year.

Eligibility to release funds

To be eligible to release your funds under the FHSSS, you must first satisfy the following criteria:

• You must be 18 years or older at the date of your request to release funds.
• You must be a first-home buyer, having never owned property in Australia.
• Your name must be on the title of the property you intend to buy.
• The property must be residential and located in Australia.
• You must intend to occupy the property as your home for a minimum of 6 months of the first 12 months it is available.

Associated ‘deemed’ earnings

When you're ready to purchase your first home, you can apply to the Australian Taxation Office (ATO) to release your FHSSS contributions, along with the associated deemed earnings. The ATO calculates your earnings using its Shortfall Interest Charge (SIC) rates, which fluctuate quarterly. As of December 2025, the current SIC rate is 6.61%. Since these earnings are 'deemed' by the ATO, they are fortunately not subject to the investment risks associated with your super fund.

Taxation on release of funds

Once your release request is validated, your super fund will release the FHSSS contributions and associated earnings to the ATO. Before the funds are paid to you, the ATO will withhold tax based on your expected marginal tax rate, less a 30% tax offset. If your marginal tax rate cannot be estimated, the tax withheld will be 17%.

Withholding tax is required because your FHSSS release amount is generally treated as taxable income. The only component that is not taxable upon release is any non-concessional contributions made under the scheme, as these were contributed from after-tax funds. The taxable components of the release, alongside the tax withheld, will be detailed in a payment summary issued by the ATO, which you’ll need to include in your tax return.

30% FHSSS tax offset

Although concessional contributions under the scheme are taxable when released, the 30% FHSSS tax offset helps ensure the original tax benefit from contributing is largely preserved. This is portrayed in the below example.

If a first home buyer with a marginal tax rate of 32% contributes $10,000 concessionally under the scheme:

• They can claim a $10,000 deduction on their tax return, saving $3,200 in tax (32% of $10,000).
• The super fund pays $1,500 in tax on the contribution (15% of $10,000), leaving $8,500 in the fund.

When the $8,500 is released, the ATO withholds tax at the buyer's marginal rate (32%) minus the 30% FHSSS tax offset, meaning only 2% tax ($170) is withheld.pixels

Therefore, the effective tax savings are $1,530; calculated as $3,200 saved from the tax refund, minus $1,500 super fund tax and $170 withheld on release.

By understanding the eligibility criteria, release process, and potential tax savings of the First Home Super Saver Scheme, eligible first home buyers can boost their deposit, bringing their journey to home ownership one step closer. If you’d like to learn more about the FHSSS and how it may apply to your personal situation, please reach out to one of our friendly accountants at FAJ for tailored assistance.