The tax treatment of the FHSS scheme is the main reason it can be more effective than saving in a bank account. Here’s a full breakdown of how FHSS is taxed at each stage.
Tax on Contributions
Concessional contributions (salary sacrifice or personal deductible)
When you make concessional FHSS contributions:
- Taxed at 15% contributions tax on entering the fund (instead of your marginal income tax rate)
- The tax saving vs saving outside super depends on your marginal rate
| Marginal rate | Tax on super contribution | Tax saving per $15,000 contributed |
|---|---|---|
| 19% | 15% | ~$600 |
| 32.5% | 15% | ~$2,625 |
| 37% | 15% | ~$3,300 |
| 45% | 15% | ~$4,500 |
For most workers (32.5%+ marginal rate), the annual tax saving on $15,000 of concessional FHSS contributions is approximately $2,000–$4,500.
Non-concessional contributions (after-tax personal contributions)
Non-concessional FHSS contributions are made from money that has already been taxed at your marginal rate — no additional contributions tax applies, and there is no tax deduction. The benefit of using these for FHSS is that they are withdrawn tax-free.
Tax Inside the Fund (Earnings)
Your FHSS contributions sit in your regular super account and are invested. Earnings inside super are taxed at 15% (in accumulation phase).
However, for FHSS release calculations, the ATO applies a deemed earnings rate — the 90-day bank bill rate + 3% (approximately 6–7% depending on market conditions). This deemed rate is used to calculate “associated earnings” on your FHSS contributions, not the actual investment returns.
Tax at Withdrawal (Release)
When you withdraw your FHSS savings:
For concessional contributions and their associated earnings:
- Taxed at your marginal rate for that income year
- Minus a 30% tax offset (the 15% contributions tax you’ve already paid, doubled as an additional concession)
- Effective tax rate is approximately: marginal rate − 30%
For non-concessional contributions:
- The non-concessional component is tax-free on withdrawal
Example — concessional FHSS release:
| Detail | Amount |
|---|---|
| FHSS concessional contributions released | $45,000 |
| Associated deemed earnings | $5,400 |
| Total FHSS releasable amount | $50,400 |
| Marginal rate (assuming $70,000 other income = 32.5%) | 32.5% |
| Less 30% offset | Net tax rate: 2.5% |
| Tax payable on $50,400 | ~$1,260 |
| ATO withholds first, reconcile in tax return |
At a marginal rate of 32.5%, the effective tax rate on FHSS withdrawal is approximately 2.5% — much lower than any alternative savings vehicle.
FHSS in Your Tax Return
In the year you receive an FHSS release, you must:
- Include the FHSS assessable amount as income in your tax return
- Claim the 30% tax offset for concessional FHSS amounts
- The ATO will have withheld tax at the time of release — this is reconciled in your tax return (you may get a refund or owe a small additional amount)
The ATO sends a FHSS payment summary showing the taxable and tax-free components.
If You Don’t Buy a Home
If you release FHSS funds but don’t buy a property:
- You can recontribute to super within 12 months (as a non-concessional contribution) — no FHSS tax
- Or pay FHSS assessed tax: your marginal rate + an additional 20% on the assessable amount
The recontribution option is strongly preferable if plans change.
For more: FHSS Eligibility, FHSS Contribution Strategy, FHSS How to Apply, FHSS Mistakes to Avoid, After-Tax vs Before-Tax Super Contributions. For advice tailored to your situation, speak with a licensed financial adviser via MoneySmart.