The First Home Super Saver (FHSS) Scheme is one of the more useful tools available to first home buyers in Australia — and one of the most consistently misunderstood. The common assumption is straightforward: you contribute extra money to super, you pull it out when you’re ready to buy, you use it as a deposit. What most people don’t model is the part where the ATO applies a deemed earnings rate to your balance and then withholds tax on the way out. The number that lands in your bank account is meaningfully lower than the number you put in. This piece runs the actual maths.
What the FHSS Scheme actually allows you to contribute and release
Under the FHSS Scheme, you can make voluntary concessional (pre-tax) or non-concessional (after-tax) contributions to your superannuation fund, then apply to the ATO to have those contributions — plus associated earnings — released for use as a home deposit. The annual cap on contributions that count toward the FHSS is $15,000 per financial year. The lifetime maximum you can request to be released is $50,000 in contributions. Both figures apply per individual, so a couple buying together can access up to $100,000 combined in contributions.
Those caps sound clean. The complication is that what gets released is not just your contributions — it’s your contributions plus a deemed earnings figure, minus tax. Each of those three adjustments changes the number you’re working with. Use the FHSS calculator to model your specific situation before you apply.
| Key point: The $50,000 cap is on contributions only. Your actual release amount will be higher (due to deemed earnings) before tax, and lower (due to withholding) after tax. Neither figure equals $50,000. |
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How the ATO calculates deemed earnings on your FHSS balance
This is the step most buyers skip when they run their own numbers. The ATO does not look at how your super fund actually performed. Instead, it applies a deemed earnings rate, calculated as the Shortfall Interest Charge (SIC) rate for each quarter your contributions were held inside super. For the 2024–25 financial year, the SIC rate was approximately 7.88% per annum. The ATO compounds this quarterly from the date of each contribution to the date of your release determination.
In practice, this means a $15,000 contribution made in July 2023 and released in mid-2026 would accrue roughly three years of deemed earnings at that rate. Using 7.88% annually, that single contribution would generate approximately $3,800 in deemed earnings — bringing the gross release figure for that contribution to around $18,800 before any tax is applied. Across a full $50,000 in contributions spread over three to four years, the total deemed earnings component commonly sits between $8,000 and $15,000.
The deemed rate is not fixed permanently — it’s set by the ATO quarterly — so your actual figure will vary. The calculation the ATO performs at release time is the definitive one.
What the ATO withholds: the tax calculation on release
Here is where buyers consistently overestimate their usable deposit. When the ATO releases your FHSS amount, it withholds tax on the entire assessable FHSS released amount — which is your contributions plus the deemed earnings. The withholding rate applied is your marginal tax rate, minus a 30% tax offset.
That offset sounds generous, but the net result still takes a significant slice. Consider a buyer earning $95,000 in taxable income — sitting in the 32.5% marginal tax bracket. Their withholding rate is 32.5% minus 30%, leaving a net tax rate of 2.5% applied to the full assessable amount. At that income, the tax hit is relatively small. But for a buyer earning $135,000 (37% marginal rate), the net withholding rate is 7%, and for a buyer earning over $190,000 (45% marginal rate) it is 15%.
| Taxable Income | Marginal Rate | Net Withholding Rate | Tax Withheld (est.) | Deposit in Hand (est.) |
|---|---|---|---|---|
| Under $45,000 | 19% | 0% (floored) | $0 | ~$62,000 |
| $45,001–$135,000 | 32.5% | 2.5% | ~$1,550 | ~$60,450 |
| $135,001–$190,000 | 37% | 7% | ~$4,340 | ~$57,660 |
| Over $190,000 | 45% | 15% | ~$9,300 | ~$52,700 |
Numbers above are estimates only, assuming $50,000 in contributions and $12,000 in deemed earnings. Your actual figures depend on your specific contribution dates, the SIC rate applied each quarter, and your income in the year of release. The ATO reconciles the final tax position in your income tax return for the year of release, so the withholding amount may be adjusted upward or refunded depending on your actual circumstances.
| Worth noting: If your income is below $18,200, the 30% tax offset can reduce your withholding to zero — making the FHSS Scheme particularly efficient for buyers who are studying part-time or working reduced hours in the years they contribute. |
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Where the scheme still makes sense despite the tax
Even after the ATO’s share, the FHSS Scheme typically produces a better outcome than saving the equivalent amount in a standard bank account — because concessional contributions enter super taxed at 15% rather than your marginal rate. For a buyer on $95,000 using salary sacrifice, a $15,000 gross contribution is taxed at 15% inside super ($2,250) rather than at 32.5% outside it ($4,875). That difference — roughly $2,600 per year — accumulates meaningfully across two to four years of contributions.
A buyer in Brisbane or Adelaide who earns $85,000, maximises contributions at $15,000 per year for three years, and releases in 2026 could realistically access approximately $55,000–$58,000 after tax. That is a deposit component. It is not a full deposit for a median-priced property in Sydney’s inner west or Melbourne’s inner north, but combined with savings and potentially the First Home Guarantee (FHBG) — which allows eligible buyers to purchase with as little as 5% deposit without paying Lenders Mortgage Insurance (LMI) — it can be enough.
The FHBG, administered by Housing Australia, has 35,000 places per year nationally across its various streams. Combining the FHSS with the FHBG is explicitly permitted, and the ATO’s own guidance confirms FHSS funds count toward your deposit for scheme eligibility purposes. Check your borrowing capacity and deposit requirements before deciding how much to direct to FHSS versus liquid savings.
The conditions that can cost you the whole amount
The FHSS Scheme comes with conditions that, if breached, result in a 20% tax on your released amount — effectively wiping out the benefit entirely. The key ones buyers overlook:
You must apply for your determination before signing a contract. Buyers who sign a contract first and apply to the ATO after are ineligible. The determination must come first.
You have 12 months from the date of release to sign a contract (the ATO can grant a 12-month extension in some circumstances, but this is not automatic).
The property must be your residence. You must intend to live in the property for at least six months within the first 12 months of ownership. Pure investment purchases do not qualify.
You must never have owned property in Australia before. This applies to all previous ownership, including investment properties — not just owner-occupied homes.
A buyer in Perth who releases their FHSS amount in February 2026 and then cannot find a suitable property in time faces a genuine risk of triggering that 20% tax. Timing the release carefully — and not applying until you are genuinely ready to transact — is more important than maximising the balance inside super.
Frequently Asked Questions
| This article is general information only and does not constitute financial advice. Please speak to a licensed mortgage broker about your specific circumstances. |
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Yes. You can request an FHSS determination from the ATO via myGov at any time. This shows your eligible contributions, the deemed earnings applied, and an estimated release amount. The determination is not binding until you confirm it, so requesting one to check your numbers costs nothing.
Yes, both types count toward the $15,000 annual and $50,000 lifetime caps. Concessional contributions (salary sacrifice or personal deductible contributions) are more tax-efficient for most buyers because they enter super at 15% rather than your full marginal rate. Non-concessional contributions (after-tax money) are taxed differently on release — only the deemed earnings component is assessable, not the contributions themselves.
If you don’t sign a contract within 12 months of release (or within an ATO-approved extension period), you must either recontribute the amount to super or pay the 20% FHSS tax on the assessable released amount. Neither outcome is disastrous, but both eliminate the scheme’s tax advantage, so don’t release funds speculatively.
Yes. Each individual has their own $50,000 contributions cap, so a couple buying together can access up to $100,000 in combined contributions, plus each person’s respective deemed earnings, minus each person’s withholding tax. Both partners must independently meet the eligibility conditions — including never having previously owned property in Australia.
Using the FHSS Scheme does not disqualify you from the First Home Guarantee (FHBG). FHSS funds count as part of your deposit for FHBG eligibility purposes. However, you still need to meet the FHBG’s income test (currently $125,000 for singles and $200,000 for couples as a combined income cap) and the relevant property price caps, which vary by state and region.
General Information Disclaimer
This article is general in nature and does not constitute financial or credit advice. Please speak to a licensed mortgage broker before making any lending decisions.
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