Is the First Home Saver Scheme worth using?

Dec 19, 2017

The First Home Saver Scheme is now available to First Home buyers to increase the amount they have available for a house deposit by contributing to super and obtaining tax concessions. Eligible contributions can be made from 1/7/17 and eligible withdrawals could be made from 1/7/18.

Am I Eligible?

Any person over 18 who has never held an interest in real property (residential or commercial) and has never previously made a super withdrawal using the First Home Saver Scheme is eligible.

You'll also need to check that your Fund offers the option to use the First Home Saver Scheme.

If you earn less than $37,000, although you are eligible, you wont be able to obtain a benefit from the scheme due to the way the tax concessions are structured.

How does the scheme work?

If you are eligible, you can make voluntary contributions to your Super Fund of up to $15,000 per year. Total contributions are limited to $30,000. Your mandated employer contributions can not be used for this scheme. To be beneficial you would either need to ask your employer to salary sacrifice your voluntary contributions to reduce your taxable income or you would need to claim a tax deduction for your voluntary super contributions by lodging a notice with your Super Fund. The deduction notice must be lodged before you request a withdrawal under the scheme.

When you are ready to purchase your first home you can apply to withdraw up to 85% of the voluntary amounts you have contributed plus associated earnings. Within 12 months of the withdrawal you must:

  • enter into a contract to buy or construct residential premises that you intend to occupy for at least 6 months in the first 12 months,
  • occupy the premises as soon as practicable and
  • lodge a notice with the ATO to advise of the purchase within 28 days of entering the contract.

Notifying the ATO is critical because a 20% tax will apply, effectively cancelling out the benefits of the scheme if you don't notify them within 28 days.

What is the benefit of participating in the scheme?

Below is a table comparing how much you could save by making a $30,000 concessional contribution to super and using the First Home Save Scheme versus saving the same amount outside of super. The table ignores earnings. The amount you have left after tax varies depending on your income level.

Importantly the scheme is not going work for anyone earning below $37,000. It also may not work if you earn more than $37,000 but claim tax deductions for contributions that result in your taxable income falling below $37,000.

Taxable Income

After tax savings utilising First Home Saver Scheme

After tax savings outside of Super

Extra Savings from using First Home Saver Scheme

$37,001-$87,000

$24,352

$19,650

$4,702

$87,001-$180,000

$23,205

$18,300

$4,905

$180,001+

$21,165

$15,900

$5,265