Buy Your First Home With Your Super - 9 Steps You Need To Know

If you think building your super is only for retirement years, well that's not anymore true, well at least not after 13th December 2017. As on that date, new laws were enacted to allow you super to be withdrawn to purchase your first home.  

With house prices high, Australians are entering the housing market later in life as they are finding it difficult to save for a deposit for their first home. The FHSS Scheme is intended to help Australians save a deposit for their first home inside superannuation and reduce pressure on housing affordability.

Under the FHSS Scheme, first home buyers who make voluntary contributions into superannuation system can withdraw those contributions (up to $30,000 limit) and an amount of associated earnings for the purposes of purchasing their first home.

A young couple, if both eligible, can withdraw a total of $60,000 of voluntary contributions, plus associated earnings as their total release amount. This is a once only withdrawal scheme. There is no limit to the associated earnings amount, hence the longer the member waits, the more they can withdraw.

The process of withdrawal is very simple, after 1st July 2018, you ask ATO to make a determination on how much you can withdraw. ATO will look at all the voluntary contribution reported by funds where you are a member and add the associated earnings to it and give you a determination of the maximum amount that you can withdraw

Once the trustees of the super fund receive a release authority, they will pay to the ATO the amount specified in the release authority, even if no voluntary contributions are made to the fund. ATO will then withhold tax based on your estimated marginal tax rate from your payment after regarding 30% offset which is available to you and pay you the money (called assessable FHSS released amount) and issue you with a payment summary. No tax is withheld from non-concessional contributions released to you.

Assessable FHSS released amount, includes 85% of concessional contributions & associated earnings on both concessional and non-concessional contributions which you need to include in your tax return for the financial year you request the release.

You must then buy a ‘residential premises’ after you receive the money within 12 months, this includes vacant land (if you’re planning to build), but not any premises that cannot be occupied as a residence, like not houseboats or motor home. Under special circumstances you can ask the Australian Tax Office (ATO) to extend this period to 24 months.

The home you purchase must become your home and not an investment property; you would have to occupy the premises for at least 6 months in the year after purchase (or construction). If you don’t buy a home within the time frame, you can either contribute the released amount back into super or pay a tax equal to 20% per cent of the concessional amount and associated earnings released to you.

Although the scheme sounds simple, there are many tricky corners to the scheme, if you are an advisor (or a parent of a teenager) please read the below detailed steps of the scheme:

Step 1. Making a Contribution

Eligible contributions in the scheme are:

(a) the maximum amount of contributions that may be eligible to be released is $30,000; and

(b) the maximum amount of contributions made in a particular financial year that may be eligible to be released is $15,000.

A concessional contribution can be an employer contribution above the mandated employer (SG - 9.5%) or non-concessional (after tax) member contribution. .

The FHSSS applies to voluntary superannuation contributions made from 1 July 2017, however contributions, along with deemed earnings, can be withdrawn for a home from 1 July 2018.

The real benefits of the scheme are only when you save via pre-tax income, by entering into a salary sacrifice arrangement with your employer or make a contribution from after tax salary where you also claim a tax deduction. You can contribute into more than one fund including a self managed super fund.

These  salary sacrifice concessional contributions are taxed by the fund at 15%, hence 85% of the pre-tax amounts can be released. 100% of voluntary non-concessional (after tax) contributions can be released.


Mary is on a salary of $100,000, her employer contributes $9,500 as mandated SG contributions (9.5% compulsory super) to a superannuation fund in the financial year ended 30th June 2018. She enters into a salary sacrifice arrangement with the employer where she sacrifices $1,000 per month to super and the employer contributes $12,000 per year into a self managed super fund. On 15th June 2018, Mary contributes another $5,000 into her SMSF and claims it as a tax deduction in her individual income tax return.

Her total contributions are:

SG Employer Contributions $9,500

Salary Sacrifice Contributions $12,000

Concessional Contribution $5,000

Total $26,500

Only the $12,000 salary contributions and the $3,000 of the $5,000 concessional contributions are eligible or total $15,000 will be eligible FHSSS

Any concessional contributions above the cap amount ($25,000 for Financial year 2017/18) are not eligible, hence $1500 above the cap amount is not eligible and there is an annual limit to the FHSS Scheme of $15,000 which means that only $3,000 of the $5,000 concessional contribution can be included in the scheme.

85% or $12,750 of the $15,000 can be released to Mary along with any associated earnings.

 Step 2. What Contributions Can Be Released

 FHSS releasable contributions amount includes:

(a) 100% your FHSS eligible non-concessional contributions;

(b) 85% of your FHSS eligible concessional contributions for the financial year.

It is expected that the majority of voluntary contributions that are made by individuals under the FHSS Scheme will be concessional contributions.

Step 3. How To Get Your Contributions Released From Super

The amount withdrawn can used as a deposit for a house or be a part of the balance due on settlement. The FHSS release amount cannot be used to furnish the home or for any other purpose such as acquiring an investment property or to repay debt.

To get the amount released from super under the FHSSS you must be

  • 18 years or over,
  • Have not used the FHSSS before, and
  • Have never owned real property in Australia or a company title interest in land in Australia (unless the Commissioner of Taxation determines that you have suffered a financial hardship).

You will be eligible if you meet all eligibility criteria, even if you plan to purchase your first home with a partner who does not meet the criteria. You can start making voluntary super contributions from any age, but you can't request a release of amounts under the FHSSS until you are 18 years old.

In making a FHSS determination, the ATO must identify a ‘maximum release amount’ based on your past (reported) contributions and associated earnings. When you are given one of these determinations or notices, you can request ATO to issue a release authority in respect of your superannuation interests, once you are assured that all contributions made are reported correctly in the determination.

When the ATO receives this request from you - they issue a release authority in relation to your superannuation interest to the trustees of the fund who are holding your super interests. In making your request, you can request any amount up to the maximum release amount identified in a FHSS determination be released from one or more of your superannuation interests.

FHSS amount should be received before you sign a contract to purchase or construct residential premises or you may be liable to pay FHSS tax (explained below). You cannot purchase a house (sign a contract of sale) and then apply for a release. As the release amount may take some time to be released, you can pay the initial deposit from your own savings and use the released amount for property settlement, if you wish.

Step 4. How Are Your Contributions Released

To ensure a valid request for a release authority is made, you must notify ATO the amount to be released and identify the superannuation interest or interests from which the amount is to be released, e.g. the name of the super fund and your member number etc.

Once you specify the amount to be released (maximum or a lower amount), you cannot request the ATO for release of any additional amounts. This is a once only event, however, if a superannuation provider does not release the requested amount (due to various reasons), a further request can be made to a different superannuation fund for an unreleased amount.

You can request multiple FHSS determinations from ATO, prior to purchasing your first home, however after a request for a release authority (which is an irrevocable request) has been made in relation to a determination, you will not be able to seek any further FHSS determinations.

This release amount is referred to as the ‘FHSS maximum release amount’ and comprises the amount representing the voluntary contributions that are eligible to be released (the ‘FHSS releasable contributions amount’) and the associated earnings related to those contributions.

The super fund who receives this release authority, will pay your superannuation interests to ATO who will withhold an amount for any tax payable by you, before paying it to you with a payment summary.

Step 5. How Is The Release Amount Calculated

FHSS maximum release amount is identified in a determination that is made by ATO which has a central role in identifying and calculating the FHSS maximum release amount.

The amount of associated earnings is calculated by the ATO using a proxy earnings rate. The proxy earnings rate will be the shortfall interest rate - which is essentially the 90 days Bank Accepted Bill rate, with an uplift factor of 300 basis points. For 2016/17 this rate was 4.78%.

Associated earnings are calculated for every day in the period leading up to the time that the ATO makes a FHSS determination. Ending the period on the day that the ATO makes the determination ensures the amount in the determination is the FHSS maximum release amount.

For contributions made in the 2017-2018 financial year, earnings are calculated from the first day of the year. However, for contributions made in later financial years, contributions are calculated from the first day of the month in which the contribution is made (or is taken to be made because of the ordering rule - see below).

Step 6. Order How Contributions Are Counted

Contributions that are to be included in the FHSS releasable contributions amount are relevant - contributions are counted in the order in which they were made (that is, from earliest to latest) to the super fund – this means that contributions you make in an earlier financial year are counted before contributions in a later financial year. Contributions you make within a financial year are counted in the order you make them.

A simultaneous contributions rule applies – this means that if you make an eligible concessional contribution and an eligible non-concessional contribution at the same time (for example, in the same payroll process), your non concessional contributions are taken to be made first.

Prioritising earlier contributions will generally maximise the amount of associated earnings that are calculated in respect of your contributions. Treating non-concessional contributions as being made first maximises your FHSS maximum release amount because the non-concessional contributions are not discounted.

Once the contributions that are counted towards your FHSS releasable contributions amount have been identified, earnings associated with those contributions are calculated for each of the contributions on a daily basis. The calculation of earnings will be done by the ATO as part of the determination process.

An FHSSS amount can be released from a fund where the contribution may or may not have been made. Where the super interest is released from is up to you and you make that choice when you request ATO to release based on a determination issued to you.

Step 7. What Happens After Release

If you do not purchase your first home within 12 months of receiving the released amount you can either re-contribute the net amount (after withholding tax) received into superannuation, or pay an amount of tax (the first home super saver tax) to unwind the concessional tax treatment that applied on release.

Any release amounts that are calculated by reference to your FHSS eligible non-concessional contributions are treated as Non Assessable Non Exempt (NANE). However any amounts related to your FHSS eligible concessional contributions and the total associated earnings calculated in respect of any contributions are taxed at your marginal rates, but with a tax offset of 30 per cent. Amount included in assessable income is referred as ‘assessable FHSS released amount’.

The tax offset is neither refundable nor able to be carried forward.


Mary in the above example had made voluntary contributions of $15,000 as concessional contributions in 2017/18 financial year. In the following year, assume her employer contributes $16,000 as SG Contributions for her. Further,  she enters into a salary sacrifice arrangement with her employer where the employer will deduct  $1,000 a month as salary sacrifice pre- tax and $500 a month after tax (non-concessional contribution) and contribute to her SMSF.

Total contributions made for her are

SG Employer Contributions $16,000 (compulsory super) made by her employer;

Voluntary Salary Sacrifice Concessional Contributions $12,000; and

Voluntary Salary Sacrifice Non-Concessional contributions $6,000.

Total Contributions = 35,000

Maximum FHSSS contributions can be $15,000 per year and compulsory super is excluded.

Hence out of the $18,000 voluntary contributions, maximum $9,000 out of $12,000 can be concessional contributions (as the employer has already contributed $16,000 - any contributions above the cap amount of $25,000 are disregarded).

$9,000 Concessional Contributions - those made from July 2018 to March 2019 & $6,000 Non-Concessional Contributions are eligible - those made from July 18 to June 2019

Assuming that $22,000 are associated earnings till 1st July 2030 when Mary requests ATO to release her super under FHSS Scheme

Her determination issued by the ATO will include maximum release amount of :

85% of $15,000 Concessional Contribution in 2017 / 18 financial year $12,750 +

85% of $9,000 Concessional Contribution in 2018 / 19 financial year - $7,650 +

100% of $6,000 Non-Concessional Contribution in 2018 / 19 financial year $6,000 +

$22,000 of associated earnings.

Total = $48,400 - Maximum releasable amount

However, since $6,000 is Non-Concessional amount $42,400 is her "assessable FHSS amount" which will be included in Mary's income for the financial year 2030 / 31 and she will get 30% tax offset of this amount.

The ATO may assume that this $42,400 may take Mary to the highest marginal tax rate and may decide to withhold 17% (45% highest marginal tax rate + Medicare Levy - 30% offset) from this amount or withhold $7,208 and pay Mary the balance $41,192 ( $48,400 less $7,208) to purchase her first home.

Step 8. Release Amount Can Be Contributed Back To Super

You would have met the scheme conditions if the first home is purchased within 12 (including any extension to the period allowed by ATO) months of receiving the released amount and the first home is at least equal to the sum of the amounts that were released, you have occupied the premises, or intend to occupy it as soon as practicable and you intend to occupy the premises for at least 6 of the first 12 months that it is practicable to occupy the premises.

If you have satisfied the conditions about purchasing or constructing your first home within a specified period, you must notify the ATO in an approved form that you have satisfied these conditions within 28 days after you have entered into a contract of purchase.

If you do not satisfy this requirement about entering into a contract to purchase or construct your residential premises, you may instead notify ATO that you have re-contributed an amount back into superannuation. This notification can only be made if you make one or more non-concessional contributions during the period that you had to enter into a contract and the total amount of your non-concessional contributions must be at least equal to your assessable FHSS released amount less any amounts that were withheld by ATO.

Requiring that the re-contribution be done as a non-concessional contribution also ensures that you do not receive a further benefit from claiming another deduction in contributing the necessary amount back into superannuation. You have to also make sure that this re-contribution (as a non-concessional contribution) does not breach your non-concessional contribution cap amount for that year.


In our example above Mary received

85% of $15,000 Concessional Contribution in 2017 / 18 financial year $12,750

85% of $9,000 Concessional Contribution in 2018 / 19 financial year - $7,650

100% of $6,000 Non-Concessional Contribution in 2018 / 19 financial year $6,000

$22,000 of associated earnings.

= $48,400 is the maximum releasable amount.

However assessable release amount is $42,400 and withholding amount is $7,208

The assessable released amount after withholding tax is $35,192 which must be re-contributed back (non-concessional contribution of $6,000 is not required to be re-contributed) into superannuation as a non-concessional contribution, if the first home is not purchased within 12 months (or extended allowed time period) by Mary as non-concessional contribution.

Step 9.  Pay Tax On The Released Amount

If you fail to purchase your first home within this period of time and if you do not want to re-contribute the amount back into a superannuation fund, you can opt to pay tax on the assessable released amount. You can apply to ATO for an extension of time for a maximum of a further 12 months to re-contribute an amount into your super fund or purchase your first home.

If further time is not approved by ATO you will have to pay 20% of your assessable FHSS released amount. Or you may be subject to this tax if you do not notify ATO that you have purchased a home or re-contributed the required amount into superannuation.

Your liability to FHSS tax arises at the time that you fail to notify ATO that you have entered into a contract or re-contributed the released assessable amount. Your liability to pay the tax arises after the 12 month period that you had to notify ATO has passed. Hence any application for an extension for a further 12 months period must be made before the expiry of the first 12 months to defer any potential tax liability.

You will receive a notice of FHSSS assessment from ATO and you will get 21 days to pay your FHSS tax. If you do not pay your assessed FHSS tax by the time that it is due and payable, you are liable to the general interest charge for each day in the period over which the amount is due but unpaid.


In our example above the FHSS assessable amount is $42,400 and withholding tax is $7,208. If Mary does not purchase a home and does not re-contribute $35,192 as calculated above, she will have to pay 20% FHSSS Tax on $42,400 or $8,480.

For more information on how the FHSS applies to you, please contact our office and speak with one of our qualified team of advisers.