Using Your Super to Buy Your First Home: The First Home Super Saver Scheme Explained

For most young Australians, the hardest part of buying a first home is not the loan. It is the deposit. You can be earning well, budgeting carefully and still watch the target move faster than the savings account.

The First Home Super Saver Scheme is one of the few tools designed specifically for that problem. It lets you save for a deposit inside your super fund rather than in a standard savings account, then release that money when you are ready to buy.

It is not complicated, but it is precise. The order of the steps matters, and getting them out of order can cost you. Here is the plain English version.

What the scheme actually does

You make voluntary contributions into your Super. Later, when you are buying your first home, you apply to have those contributions released, along with an amount for the earnings they are treated as having made.

The key word is voluntary. The scheme covers contributions you choose to make, such as salary sacrifice or after-tax contributions you have not claimed a deduction for. It does not cover the compulsory super your employer pays you. That money stays where it is.

There are limits on how much you can contribute in a single financial year and how much you can release in total. Those figures change from time to time, so check the current amounts on the ATO website before you plan around them.

Who can use it

Broadly, you need to be at least 18 when you request a release determination, and you must not have owned property in Australia before. That includes investment property, vacant land and commercial property, not just a home you have lived in.

Your name has to go on the title of the property you buy. You can only use a completed release once. There is an exception for people who have previously owned property but have experienced documented financial hardship, so it is worth asking rather than assuming you are out.

Couples can each apply against their own contributions, which is often where the scheme does its most useful work.

The order of the steps

This is the part people get wrong.

1. Request a determination from the ATO. This has to happen before ownership of a property transfers to you.

2. Sign your contract to buy or build, within the timeframe the ATO sets around your determination.

3. Request the release of your money. Not all of it comes out. Concessional contributions are released at a reduced rate because tax has already been paid on the way in.

4. Enter your contract, or recontribute the money to super if you do not buy in time.

5. Tell the ATO what you did and when.

You also need to genuinely intend to live in the property, and to actually live in it for at least six of the first twelve months. This is a first home scheme, not an investment strategy.

What it will not do

It will not increase how much a lender will lend you. It will not make money appear that you did not contribute. And it is not instant. Releasing the money takes time, so it needs to sit inside your buying timeline rather than being remembered at the last minute.

There is also a tax outcome when the money is released, and a penalty applies if you release funds and then do not meet the requirements. Neither is a reason to avoid the scheme. Both are reasons to plan it properly rather than DIY it under pressure.

What to do next

If buying a first home is on your list for the next few years, three things are worth doing now.

• Work out what your deposit target actually is, based on the kind of property and area you are looking at.

• Check whether making voluntary contributions suits your income, your cash flow and your other goals. It is not automatically the right answer for everyone.

• Understand the timing before you start house hunting, not after you have found a place you love.

The scheme rewards people who set it up early and follow the steps in order. That is a planning job more than a paperwork job, and it is the kind of thing worth talking through before you commit.

This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal advice. Before acting on anything in it, consider whether it is appropriate for your circumstances and seek advice that takes your situation into account. Where a scheme, rule or threshold is mentioned, check the current position at ato.gov.au or moneysmart.gov.au.