FHSS Scheme Mistakes to Avoid — Common Errors That Can Cost You

The First Home Super Saver (FHSS) scheme is a powerful savings tool, but it has specific rules that can trip you up. Here are the most common mistakes — and how to avoid them.

Mistake 1: Signing a Contract Before Requesting a Determination

The rule: You must request an FHSS determination from the ATO before signing a contract to purchase a property. Once you sign, you then have 14 days to apply for the determination (some flexibility exists, but this creates unnecessary risk).

Why it matters: If you sign first and then apply, the ATO may determine that the timing doesn’t comply. Always get your determination first.

The fix: Apply for the determination as soon as you are actively searching for a property and ready to make offers.

Mistake 2: Expecting Funds Immediately

The rule: After applying for FHSS release, funds take 15–25 business days to arrive in your bank account.

Why it matters: If your settlement is in 21 days, FHSS funds may not arrive in time. Many buyers are surprised by this delay.

The fix: Plan for settlement at least 6–8 weeks after applying for release. Negotiate a longer settlement period when making an offer.

Mistake 3: Not Notifying Your Fund About FHSS

While you don’t need to tell your fund when making contributions, you should understand that contributions sit in your regular super account — not a separate FHSS account. Don’t withdraw or roll over your super while FHSS contributions are unresolved.

The fix: Avoid switching funds or making rollovers while waiting for an FHSS determination — this can complicate the process.

Mistake 4: Assuming Non-Concessional Contributions Have the Same Tax Benefit

Concessional (salary sacrifice or personal deductible) FHSS contributions get a tax benefit on the way in. Non-concessional contributions (after-tax) do not get a contribution tax benefit — but they are withdrawn tax-free (the non-concessional component).

Why it matters: Many people assume all FHSS contributions work the same way for tax. If you are already at your marginal rate, using salary sacrifice (concessional) provides a far better tax outcome.

The fix: Default to salary sacrifice or personal deductible contributions for FHSS unless you have already maxed your concessional cap.

Mistake 5: Contributing Too Much in One Year

You can only count $15,000 per year toward FHSS. Contributing more than $15,000 in voluntary contributions in a year doesn’t increase your FHSS limit — the excess simply sits in super as normal super money.

The fix: Track your FHSS contributions each year. Use the myGov ATO portal to check your FHSS total.

Mistake 6: Forgetting to Include FHSS in Your Tax Return

FHSS release amounts must be included in your income tax return for the year you receive them. The ATO will send you a payment summary showing the taxable FHSS component. Forgetting to include it can result in a tax shortfall.

The fix: Keep your FHSS determination and payment summary documents for your tax agent.

Mistake 7: Assuming FHSS Works for Investment Properties

FHSS is for properties you intend to live in. If you use the released funds for an investment property, or don’t move in within 6 months of settlement, you may be subject to the FHSS tax (marginal rate + 20% on the amount).

The fix: Only use FHSS for your principal place of residence.

Mistake 8: Not Recontributing When Plans Change

If you apply for a release but don’t end up buying a home, you can recontribute the amount to your super as a non-concessional contribution within 12 months to avoid the FHSS tax. Many people miss this window.

The fix: Act promptly if plans change — the 12-month window closes faster than expected.

Frequently Asked Questions

What is the FHSS assessed tax and how bad is it? If you receive an FHSS release but don’t buy a home, and you don’t recontribute within 12 months, the ATO assesses you on the releasable amount at your marginal tax rate plus an additional 20%. For example, on a 32.5% marginal rate, the total tax rate on the assessable amount would be 52.5%. This is a significant penalty — the recontribution option is almost always better if plans change.

Can I request an FHSS determination “just to check” the amount without being committed to releasing? Yes — requesting a determination is not the same as requesting a release. The determination simply tells you the maximum releasable amount. You are not obligated to proceed with a release after receiving a determination. However, once you request a release and sign a contract, the process is harder to unwind.

Can I make FHSS contributions even if I haven’t found a property yet? Absolutely — this is the normal approach. Most people contribute for 1–4 years before they are ready to buy. You apply for the determination only when you are ready to make offers on a property. Making contributions years in advance is not a problem; it actually maximises your FHSS benefit.

What happens if I miss the 14-day window to sign a contract after getting my determination? The ATO may grant an extension in genuine circumstances, up to 24 months from the date of the determination. You should contact the ATO as soon as you realise you’ll miss the 14-day deadline. Do not sign a contract before requesting an extension if you’ve already missed the window — contact the ATO first.

Can I use FHSS to buy a property jointly with someone who is not my partner? Yes — FHSS can be used for a purchase with any co-buyer (sibling, friend, etc.), provided you individually meet all eligibility requirements. You apply for your own FHSS release separately; your co-buyer’s eligibility is assessed independently. The property must still meet the occupancy requirement — you must intend to live in it as your principal residence.

Is there any way to check my FHSS balance or eligible amount before requesting a formal determination? Yes — log in to myGov → ATO → Super → First Home Super Saver. You can view your estimated FHSS eligible contributions and an indicative releasable amount without lodging a formal determination. This is useful for planning purposes; the formal determination is only needed when you are ready to proceed with a purchase.

For more: FHSS How to Apply, FHSS Eligibility, FHSS Tax Treatment, FHSS FAQ. For advice tailored to your situation, speak with a licensed financial adviser via MoneySmart.