Jane Martinez thought she’d never own a home in Sydney. Working as a marketing coordinator on $75,000 a year, watching her savings account crawl toward a deposit while house prices sprinted away from her felt like trying to fill a bathtub with a teaspoon.
Her friends were either still living with their parents at 28 or had given up on homeownership entirely, resigned to a lifetime of rental inspections and landlord approval for hanging a single picture frame.
Then her colleague mentioned something that sounded too good to be true: “I’m using my super to save for a house deposit, and the government is basically giving me a tax discount to do it.”
That conversation changed everything. Within three years, Jane had accumulated $45,000 through a little-known scheme that most Australians have never heard of, despite it being one of the most powerful wealth-building tools available to first-home buyers.
She bought her two-bedroom apartment in Parramatta last month, and here’s the kicker, she probably saved around $8,000 in taxes along the way.
The scheme she used? The First Home Super Saver Scheme, and if you’re reading this, there’s a good chance it could work for you too.
But here’s what nobody tells you about the FHSSS, it’s not just about the money you can withdraw.
It’s about fundamentally changing how you think about saving, taxes, and building wealth. Most people approach their first home deposit like they’re filling up a piggy bank slowly, painfully, watching their money earn pathetic interest rates while inflation eats away at their purchasing power.
The FHSSS flips this entire approach on its head. Instead of fighting against the tax system, you’re making it work for you.
Instead of accepting measly savings account returns, you’re putting your money to work in diversified investment portfolios. Instead of hoping house prices will magically become affordable, you’re systematically building a war chest that grows faster than traditional savings.
Let me walk you through exactly how this works, because once you understand the mechanics, you’ll wonder why anyone saves for a house deposit any other way.
The Numbers That Matters
Traditional financial advice tells you to save 20% for a deposit. In Sydney, where the median house price hovers around $1.3 million, that’s $260,000.
In Melbourne, it’s about $200,000. Even in Brisbane or Perth, you’re looking at $140,000 to $160,000. These numbers are so overwhelming that most people either give up or convince themselves that a $50,000 deposit will somehow be enough.
The FHSSS doesn’t solve the deposit problem entirely, let’s be honest about that. What it does is give you a meaningful head start while providing tax benefits that compound over time.
You can contribute up to $15,000 per financial year and withdraw a maximum of $50,000 per person. If you’re in a relationship, that’s potentially $100,000 between you.
But here’s where it gets interesting; these aren’t just ordinary savings. When you contribute to your super through salary sacrifice, you’re paying 15% tax instead of your marginal rate.
If you’re earning $75,000 like Jane, your marginal tax rate is 32.5%. Every dollar you salary sacrifice saves you 17.5 cents in tax immediately.
Let’s say you salary sacrifice $10,000 in a year. In a regular savings account, you’d need to earn about $14,925 in gross income to have $10,000 left after tax. Through the FHSSS, you only need to earn $11,765. That’s a difference of $3,160 that stays in your pocket instead of going to the tax office.
The Eligibility Reality Check
Before you get too excited, let’s talk about who can actually use this scheme. The government isn’t running a charity here—there are specific rules, and they’re enforced pretty strictly.
You need to be 18 or older, which rules out the ambitious teenagers trying to game the system. You can’t have owned property in Australia before, and this includes some situations you might not expect.
That investment property your parents put in your name when you were 16? That counts. The family home you inherited a share of? That might count too.
The property you buy needs to be your primary residence. You can’t use FHSSS funds for an investment property or a holiday home. The government wants to help people get into homeownership, not build property portfolios.
You also need to actually live in the property for at least six months within the first 12 months of ownership. This trips up some people who buy off-the-plan apartments with long settlement periods or those who buy in regional areas but work in cities.
What Your Super Fund Won’t Tell You
Here’s something most super funds don’t advertise clearly; only voluntary contributions count toward the FHSSS. The money your employer pays (the Superannuation Guarantee) doesn’t qualify for withdrawal under this scheme.
This means you need to actively contribute additional money beyond what your boss is required to pay.
You can do this through salary sacrifice, making voluntary concessional contributions that you claim as a tax deduction, or non-concessional contributions from your after-tax income.
Most people choose salary sacrifice because it’s the simplest and provides the best tax benefits. You arrange with your payroll department to divert part of your pre-tax salary into super. \
It happens automatically, you get immediate tax savings, and your take-home pay drops by less than the amount you’re contributing.
The Compound Effect
The real magic of the FHSSS isn’t just the tax savings, it’s what happens to your money while it’s sitting in super. Traditional savings accounts are paying around 4-5% interest if you’re lucky.
Your super fund, meanwhile, is investing in diversified portfolios of shares, property, bonds, and infrastructure.
Over the long term, these investments typically return more than cash. The government calculates deemed earnings on your FHSSS contributions based on what your money would have earned in the super environment. These deemed earnings become part of what you can withdraw for your home deposit.
Jane’s $45,000 withdrawal included about $37,000 in contributions and $8,000 in deemed earnings. That $8,000 represents growth that wouldn’t have happened in a savings account, even accounting for the different tax treatments.
Couples Strategic Advantage
If you’re in a relationship, the FHSSS becomes even more powerful. Each person can contribute up to their individual limits, potentially giving you access to $100,000 combined. But both people need to meet the eligibility requirements individually.
This is where some couples get creative. Maybe one partner has owned property before and can’t use the scheme, but the other partner can. Or perhaps you time your contributions differently to maximize the tax benefits based on your respective income levels.
Jake and Emma from Melbourne used this strategy perfectly. Jake was earning $95,000 and contributing the maximum $15,000 per year.
Emma was earning $45,000 and contributing $8,000 per year. The tax savings were more significant for Jake due to his higher marginal rate, but Emma’s contributions still grew nicely in the super environment.
The Application Process
Getting your money out requires navigating some bureaucracy, but it’s less painful than you might expect. The crucial step that catches people off guard is timing your application for an FHSS determination.
You need to apply for this determination before you enter into a contract to buy property. Not before you start looking, not before you go to auctions, but before you sign anything legally binding. The determination tells you exactly how much you can withdraw and gives you permission to proceed.
Once you have your determination, you can request the release of funds. The money gets paid directly to you—not to your conveyancer or real estate agent. Then you have 12 months to sign a contract to purchase or build your first home.
That 12-month deadline is stricter than it sounds. If you don’t meet it, you need to return the money to super and pay additional tax. You can apply for a 12-month extension, but you need a good reason and you need to apply before your original deadline expires.
Building vs Buying: The Construction Complication
Using FHSSS funds to build your first home adds layers of complexity that many people underestimate. You can use the funds to buy land, pay for construction, or both. But if you’re buying vacant land with the intention to build, construction must commence within 12 months of purchasing the land.
This is where many people run into problems. Building delays are common, weather, permit issues, contractor problems, material shortages. If construction doesn’t start within that 12-month window, you’re technically in breach of the scheme requirements.
Marcus from Adelaide learned this the hard way. He bought a block of land in January, expecting to start building in September. Council approval took longer than expected, then his builder had scheduling conflicts. Construction didn’t start until the following February, three months past the deadline. He had to navigate complex paperwork to explain the delay and nearly had to return his FHSSS funds.
The Tax Implications They Don’t Explain Clearly
When you withdraw your FHSSS funds, they’re added to your taxable income for that financial year. Before you panic, understand that you receive a tax offset designed to ensure you’re not worse off than if you’d saved outside of super.
The calculation is complex, but the principle is simple: you shouldn’t pay more tax by using the scheme than you would have paid by saving in a regular account. The ATO provides calculators to help you understand the implications, but many people find the explanations confusing.
The key point is that you’re not double-taxed. The system is designed to give you a benefit, not a penalty. But it does mean your tax return for the year you withdraw FHSSS funds will be more complicated than usual.
What Happens When Life Gets Complicated
Real life doesn’t always follow neat financial planning timelines. People lose jobs, relationships end, family circumstances change. The FHSSS has some flexibility built in, but not as much as you might hope.
If you can’t meet the residence requirements due to circumstances beyond your control, like a job transfer or family illness, you might be able to get an exemption. But these are assessed case by case, and the bar is relatively high.
If you withdraw FHSSS funds but then don’t buy a property within the required timeframe, you generally need to return the money to super. You’ll also pay additional tax equivalent to what you would have paid if you’d never used the scheme in the first place.
The Bigger Picture And Why This Matters Beyond Your Deposit
The FHSSS is really about more than just buying your first home. It’s about developing a sophisticated understanding of how taxes, superannuation, and long-term wealth building work together.
People who use the scheme successfully often become more engaged with their finances generally. They start paying attention to super fund performance, understand investment options better, and develop habits around tax-effective saving that serve them for decades.
Jane, the marketing coordinator from our opening story, told me something interesting; “The FHSSS taught me that the financial system has all these tools and benefits available, but you have to actively seek them out and understand how to use them. Most people just accept whatever default options they’re given.”
Making the Decision
The FHSSS isn’t suitable for everyone, and it’s important to be honest about its limitations. It works best for people who are earning decent incomes, can commit to regular contributions for multiple years, and have realistic timelines for purchasing their first home.
It’s less suitable if you need access to your savings in the very short term, if you’re uncertain about your long-term housing plans, or if you’re already close to having sufficient deposit savings through other means.
The scheme also requires you to engage with complexity, understanding super, tax implications, timing requirements, and bureaucratic processes. Some people prefer the simplicity of traditional savings accounts, even if they’re less tax-effective.
But for many first-home buyers, particularly those in higher tax brackets or expensive property markets, the FHSSS represents one of the few genuine advantages available. It’s a way to make the tax system work in your favor while building wealth more efficiently than traditional approaches.
The question isn’t whether the scheme is perfect, it’s not. The question is whether it’s better than the alternatives available to you. For Jane and thousands of other Australians, the answer has been a resounding yes.
If you’re serious about buying your first home and willing to invest the time to understand how the scheme works, start making voluntary super contributions today. Every month you delay is a month of potential tax savings and investment growth you’re missing out on.
The property market isn’t getting any easier, but at least now you know about one tool that can help level the playing field slightly in your favor.