This article provides general information only and does not constitute personal financial advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, you should consider whether it is appropriate for you and seek advice from a licensed financial adviser if necessary.

The problem: saving a deposit while super grows untouched

Most Australians save for a first home in a bank account earning 4% to 5% interest, taxed at their marginal rate. Meanwhile, their superannuation sits locked away, compounding tax-effectively at 15% on earnings. The First Home Super Saver Scheme (FHSS) bridges that gap: it lets eligible first home buyers make voluntary contributions to super, then withdraw them (with associated earnings) to fund a first home deposit, all while keeping the tax advantage.

According to the Australian Taxation Office, you can contribute up to $15,000 per financial year (maximum $50,000 in total across all years) as voluntary concessional or non-concessional contributions, then request a release to buy or build your first home. The tax treatment makes it more attractive than a standard savings account for many buyers.

How the FHSS calculation works

The scheme rewards you twice: on the way in and on the way out.

On the way in, voluntary concessional contributions (salary sacrifice or personal deductible contributions) are taxed at 15% inside your super fund instead of your marginal income tax rate. If you earn $85,000 a year, your marginal rate is 32.5% (plus the 2% Medicare levy, so 34.5% effective). A $10,000 contribution via salary sacrifice means $8,500 lands in your super after the 15% contributions tax, compared to $6,550 after-tax if you saved it in a bank account (at 34.5% personal tax). That $1,950 difference per $10,000 is the first advantage.

On the way out, the ATO calculates deemed earnings on your eligible contributions (using the 90-day bank bill rate plus 3% per year, compounded). When you request a release, the ATO withdraws your contributions plus deemed earnings, subtracts 15% withholding tax (not your marginal rate), and pays the net amount to you. You then declare the FHSS released amount in your tax return. The final tax payable is your marginal rate minus a 30% offset. For most first home buyers, this means zero or minimal additional tax after the offset.

Non-concessional contributions (after-tax voluntary contributions) can also be withdrawn under the FHSS, but they do not receive the 15% concessional tax treatment on the way in. The deemed earnings on non-concessional contributions are still released and taxed the same way.

The caps are strict: $15,000 per financial year in eligible contributions (both concessional and non-concessional combined count toward the $15,000 annual limit for FHSS purposes), and $50,000 total. Employer Superannuation Guarantee contributions do not count.

As covered in Principles of Finance (OpenStax, 2022), tax-deferred or tax-advantaged savings vehicles accelerate wealth accumulation when the deferral period aligns with a financial goal. The FHSS applies that principle to property deposits.

Worked example: Sarah saves for two years

Sarah earns $80,000 a year (marginal rate 32.5%, plus 2% Medicare levy). She salary sacrifices $15,000 in FY2025 and $15,000 in FY2026 into her super fund under the FHSS.

Read also: First Home Super Saver Scheme in Australia: Withdrawing Your Savings to Buy in 2027

Contributions: $15,000 x 2 years = $30,000 gross contributions. After 15% contributions tax, her super fund receives $25,500 net ($30,000 - $4,500).

Deemed earnings: The ATO calculates deemed earnings at the 90-day bank bill rate plus 3% per year, compounded. Assume an average deemed rate of 5% per year over the two-year period. Deemed earnings on the first $15,000 (held for two years) are approximately $1,500. Deemed earnings on the second $15,000 (held for one year) are approximately $750. Total deemed earnings: $2,250.

FHSS release amount: $25,500 (net contributions received by the fund) + $2,250 (deemed earnings) = $27,750 gross release. The ATO withholds 15%, so Sarah receives $23,587.50.

Tax return impact: Sarah declares the $27,750 FHSS release in her tax return. Tax at her 32.5% marginal rate would be $9,018.75, but she receives a 30% offset ($8,325), so the additional tax is $693.75. She has already paid $4,162.50 in withholding (15% of $27,750), so she receives a refund of $3,468.75.

Net outcome: Sarah contributed $30,000 gross (which would have been $20,550 after personal tax if saved outside super). She receives $23,587.50 immediately, plus a $3,468.75 refund at tax time, for a total of $27,056.25. Compared to saving $20,550 in a bank account, she is $6,506.25 ahead (plus any actual super fund earnings beyond the deemed rate, which she keeps in super).

Things to know before you start

You must be 18 or over and have never owned property in Australia (some exceptions apply for previous ownership more than six years ago under specific circumstances). You need to occupy the property as your home for at least six months in the first 12 months after purchase or construction.

The $50,000 cap is per person, so a couple buying together can each access their own $50,000 FHSS amount (total $100,000). Contributions must be within the annual concessional and non-concessional caps ($30,000 for concessional as of 2026, $110,000 for non-concessional, subject to change). You apply for the FHSS release through myGov linked to the ATO, and the process typically takes 15 to 25 business days from application to payment.

Rates, caps and eligibility rules are subject to change. Verify current FHSS terms and your eligibility at ato.gov.au or moneysmart.gov.au before making contributions. The APRA superannuation statistics provide broader context on super fund performance and industry trends. Consider whether the FHSS suits your timeline and seek advice from a licensed financial adviser if your situation is complex.