A Super way to buy your first home?
The First Home Super Saver Scheme could help you save more for your home deposit – here’s how.
By Jodie Cook - 3 min read
About Jodie
As a Member Solutions Consultant at Russell Investments, Jodie Cook understands all the ins and outs of super and retirement legislation, and loves to answer questions and help members.
Home ownership can bring feelings of achievement and security, and like building your super, buying a home can be a great way to safeguard your financial future.
But saving for your first home takes time and commitment. According to Domain’s First Home Buyer report for 2023, it takes a couple aged 25 to 34 over five years on average to save a 20 per cent deposit for an entry-level house in an Australian capital city, and almost four years to save for an entry-level unit.
While you can’t generally use your super to buy a home, the First Home Super Saver scheme (FHSS) could help you to boost your deposit.
The FHSS allows you to withdraw up to $50,000 of extra contributions you have made into your super fund to use toward your first home purchase. Any withdrawals must come from your before- or after-tax personal contributions – you can’t withdraw superannuation guarantee payments from your employer or any spouse contributions.
In general, if you’re over 18 and have not previously owned property in Australia or applied for the FHSS, you may be eligible.
The FHSS fact sheet contains details on eligibility criteria, rules for the withdrawals, and how to apply.
How it works
Let’s look at an example of how the scheme can work.
Say you earn $80,000 a year (plus super) and want to save $10,000 a year towards your home deposit.
Saving outside of super
If you save the money outside of super, you will be saving out of your income that has been taxed at your marginal tax rate.
Here’s what that looks like:
| Taxable income | $80,000 |
| Tax on taxable income1 | $18,067 |
| After-tax income | $61,933 |
| Saving outside super | $10,000 |
| Year 1 take-home pay after tax and saving | $51,933 |
For illustrative purposes only
In the first year, you will have $61,933 after tax, leaving you with $51,933 in your hand after saving the $10,000.
Saving in super
If you make before-tax contributions into superannuation, which you will later withdraw through the FHSS, your savings are taxed at 15 per cent in the super fund rather than the marginal tax rate you pay on your income. To end up with $10,000 in your super fund after this tax in super, you would need to contribute $11,765 before tax into your fund (see table below).
| Salary | $80,000 |
| Before-tax super contribution | $11,765 |
| Tax on before-tax super contribution | $1,765 |
| After-tax saving / contribution amount | $10,000 (in super fund) |
| Taxable income | $68,235 |
| Tax on taxable income2 | $14,008 |
| Year 1 take-home pay after tax and saving | $54,227 |
For illustrative purposes only
That $11,765 super contribution reduces your taxable income to $68,235 – giving you $54,227 in your hand after tax, which is $2,294 more that you can put towards your deposit in the first year than if you saved outside of super.
When you come to withdraw your money for your deposit from super through the FHSS, you will pay tax on the amount at a discounted rate so you will still be ahead compared with saving outside of super.
See more about how the FHSS treats withdrawals and investment earnings in the fact sheet.
Other considerations
The FHSS can bring tax advantages that help you to boost your deposit but there are other factors to consider.
For example, if you decide not to buy a home, you can’t usually access your money in super until you retire. If you contribute more than the $50,000 that can be withdrawn using the FHSS, the extra money will be preserved in your super fund until you retire.
Everyone’s situation is different – what works for one person may not work for another. It may be worthwhile seeking personal advice.
1 Using the ATO calculator for the 2022-23 tax year. Figures include the Medicare Levy.
2 Using the ATO calculator for the 2022-23 tax year. Figures include the Medicare Levy.