The First Home Super Saver Scheme (FHSS) is a scheme that the Australian government introduced to help aspiring first homebuyers save much faster for a deposit. 

How does it work? 

By allowing you to save some of your income in your superannuation fund.

The taxes that you pay based on your annual income is charged at up to 45% maximum. When you save any amount in your super fund, you enjoy a tax discount of 15%. That means all voluntary contributions you make towards your super lets you enjoy fewer taxes. 

That’s a great deal, right? However, there is a catch. You can only save a maximum of $15,000 in one year and up to $30,000 across all years. 

The updates that came with the 2022 Federal Budget include amendments to the FHSS. The maximum releasable amount you can get from FHSS will be raised to $50,000. That is effective starting the 1st of July 2022. 

Does your money earn? 

It does. The government pays interest on your savings based on the shortfall interest charge (SIC) rates. They update the SIC quarterly. As of April 2022, it is at a 3.07% annual interest rate. 

The earnings you get from your super are generally better than most bank savings rates. Historically, the highest interest ever earned on super funds was at 5% in the year 2012.

How much can you use for your first home deposit? 

Finally, when the time comes that you need funds for your first home deposit, you can access the fund you saved in your super. On top of that, whatever it earned in the interest all this time is added, too. 

However, you don’t exactly get the full amount as you need to pay withholding tax. This is calculated according to your marginal tax rate plus Medicare levy and minus a 30% offset benefit.

Some examples

For illustration purposes, here is an example of how your taxes and other benefits will work under the FHSS. 

Let’s say you earn $120,000 annually. Your employer needs to pay 9.5% of that for the super contribution which is equal to $11,400. You need to pay super concessional tax based on the super contribution. That amounts to $1710. Based on the marginal tax rate, you will pay $29,467 in income tax.

All in all, your total tax fee is $31,177. This is under the normal tax. 

If you wish to pay $15,000 every year towards your super funds, the tax you pay is going to be different. With the same salary, the taxable income is reduced to $105,000. You wilL pay $24,592 in income tax. And $3,675 goes to the super concessional tax. 

All in all, $28,267 is the amount of tax you pay. 

By maximising the tax discount on the super contributions you can make per year, you get a $2910 difference in tax payments. Plus, your $15,000 contribution to the fund will earn in interest yearly. 

Who are eligible to avail of the FHSS?

The minimum requirements for the FHSS are that you must be 18 years of age, have never owned a property in Australia, and have never requested the release of the FHSS before. 

Before you start saving towards your super funds under the FHSS, it’s best to get in touch with the Australian Taxation Office first to be sure. 

Will it really help you save faster?

With the tax benefits and the interest rates on your super, you can. Maximise the benefits of government programs like this to your advantage. After all, you can only use this once. If you have other saving avenues, you can use this calculator to help you determine how long you need to save for a target amount.

We can help you with your application to make the process easier. Don’t hesitate to call us if you have questions.