How investing in super can help you save for your first home

Published: 29 Sep 2021

Thinking about purchasing your first home? The First Home Super Saver (FHSS) Scheme could help you secure the deposit – by saving into your super.

How does it work?

The FHSS Scheme is designed to help first home buyers save 30% faster* towards a home deposit by making voluntary superannuation contributions. The intention is to withdraw the contributed funds (along with deemed earnings) when you’re ready to enter the housing market.

From 1 July 2018, any voluntary contributions you’ve put into super since 1 July 2017 along with deemed earnings can be withdrawn for a home deposit.

These voluntary contributions can be those you made from your before-tax pay (think salary sacrifice) and non-concessional contributions you made from your take-home pay. Employer compulsory contributions, such as Superannuation Guarantee (SG) contributions don’t count towards the FHSS Scheme.

To be eligible you must:

  • Be over 18 when you request the release of funds.
  • Have not previously owned property in Australia (including vacant land), unless deemed by the Commissioner of Taxation as suffering financial hardship.
  • Have not previously released FHSS funds.
  • Intend to live in the premises you are buying as soon as possible (remember: the FHSS does not apply to investment property, houseboats or motor homes).
  • Intend to live in the premises for at least 6 months of the first 12 months you own it.

How much can you contribute?

The most that can be released to you is $15,000 for any one financial year and $30,000 in total across all years – along with an amount of earnings that relates to those contributions.

You can speak with your employer to set up a salary sacrifice arrangement, or you can make a personal contribution (after-tax) directly to your Energy Super account by completing a Lump Sum Contribution Form available at energysuper.com.au

It’s also important to remember that these voluntary contributions must be within the existing contribution caps.  The cap for concessional contributions is $27,500 and non-concessional contributions is $110,000. Included in the concessional contribution cap are Superannuation Guarantee (SG) contributions your employer makes on your behalf.

How much can be released?

The maximum amount that can be released under the Scheme is the sum of your eligible contributions and deemed associated earnings. This amount includes:

  • 100% of eligible non-concessional contributions
  • 85% of eligible concessional contributions
  • Associated earnings calculated on these contributions using a deemed rate of return.

Remember to keep track of the voluntary contributions you’ve made. This will help keep track of the maximum FHSS amount you can have released. You can contact us on 1300 436 374 or log into your online account to check your balance at any time.

How do you apply?

From 1 July 2018, you can apply to the Australian Taxation Office (ATO) to release the voluntary contributions you made on or after 1 July 2017. When you’re ready to withdraw your funds, here’s what you need to do:

  • Apply to the Commissioner of Taxation for a FHSS determination and a release. You can apply online using your myGov account linked to the ATO.
  • Once you’ve received a determination from the ATO you can apply for a release.
  • The ATO will issue a release authority to your super fund/s. The fund/s will then send the requested release amount to the ATO.
  • The ATO will withhold any appropriate amounts of tax.
  • You will receive the remaining balance.

It’s important that you don’t enter into a contract to buy or build a home until your FHSS amount has been released from the ATO.

What you need to know once your savings are released

After the ATO releases your funds you’ll be given 12 months to sign a contract to buy or build a home. You’ll need to notify the ATO within 28 days after entering into the contract. If you don’t sign a contract within 12 months you can apply for another 12-month extension only.

If you don’t end up buying a home in this time you can either re-contribute the savings back into super (must be equal to the release amount), less any tax withheld or keep your savings and pay a tax penalty equal to 20% of the assessable FHSS released amounts and not the total amount released.

Some things to think about

  • Remember there are caps on the amount you can contribute to super in any one financial year – if you contribute too much to super you may have to pay additional tax.
  • Investment earnings on your FHSS amount are deemed by the ATO, not based on the actual performance of your super fund.
  • You can only ever apply ONCE for a release of your super under this Scheme.
  • The released FHSS amount will be offset against any Commonwealth debts owing by you.
  • You need to include the assessable amount from the payment summary that you’ll receive in your tax return for the year you requested the release.

Need more information

This is a summary only of the key elements of the FHSS Scheme. Detailed information can be found on the ATO website .

Any advice contained in this article is general in nature and not specific to your particular circumstances. You should consider your financial situation before acting on the advice. You should also obtain and consider the Product Disclosure Statement (PDS) before making an investment decision. LGIAsuper Trustee (ABN 94 085 088 484) (AFSL 230511) (the Trustee) as trustee for LGIAsuper (ABN 23 053 121 564) (RSE R1000160) (the Fund). Energy Super products are issued by the Trustee on behalf of the Fund.Financial product advice may also be provided by ESI Financial Services Pty LTD (ABN 93 101 428 782) (AFSL 224952) and is a wholly owned entity of LGIAsuper (ABN 23 053 121 564) (RSE R1000160).

*Source: http://homeownership.gov.au/first-home-buyer.html