The First Home Super Saver Scheme (FHSS) allows eligible first home buyers to save inside super — attracting concessional tax treatment — then withdraw those savings (plus associated earnings) to use as a deposit. But is it actually better than a high-interest savings account?
Quick Comparison
| Feature | FHSS (Salary Sacrifice) | High-Interest Savings Account |
|---|---|---|
| Tax on contributions | 15% (concessional rate) | Your marginal rate + Medicare |
| Interest/returns | Deemed rate (90-day T-bill + 3%) | Bank savings rate (typically 4–5%) |
| Contributions cap | $15,000/year, $50,000 total | Unlimited |
| Access | Rigid — ATO release process | Flexible — withdraw any time |
| First home obligation | Must use for eligible first home | No restriction |
| Timing risk | ATO processing can take 25+ days | Immediate access |
How the Tax Advantage Works
The core benefit of FHSS is the tax saving on contributions. When you salary sacrifice into super:
- You don’t pay income tax at your marginal rate on that amount
- The fund pays 15% contributions tax instead
- The difference is your tax saving
Example — $90,000 salary, $15,000 salary sacrifice (in super via FHSS):
| In Super (FHSS) | In Savings Account | |
|---|---|---|
| Amount contributed | $15,000 | $15,000 |
| Tax paid | $15,000 × 15% = $2,250 | $15,000 × 34.5% = $5,175 |
| Net saving in account | $12,750 | $9,825 |
| Annual tax advantage | — | $2,925 more in super |
Across 3 years of $15,000 contributions, the FHSS tax advantage at this income level is approximately $8,775 more savings compared to a standard savings account.
The Deemed Earnings Rate — Not Actual Returns
A critical FHSS feature that is frequently misunderstood: when you withdraw, the ATO calculates earnings using a deemed rate — the 90-day bank bill rate + 3% per year — not your fund’s actual investment return.
In FY2025–26, the deemed rate is approximately 6–7% per annum. This may be higher or lower than your fund’s actual return in any given year.
For members whose fund returns are lower than the deemed rate, FHSS can produce a higher effective return on paper than the actual fund performance suggests.
When FHSS Makes Sense
FHSS is generally most beneficial for:
- Higher income earners — the tax saving is greater the higher your marginal rate (32.5% + above)
- Members with 2–4 years before purchase — enough time to accumulate close to the $50,000 cap
- Members who are disciplined savers — you must not need access to these funds before purchasing
- Members who can withstand the timing delay — ATO release processing takes weeks; your property purchase timeline must accommodate this
When FHSS May Not Be Worth It
- Low income earners — at incomes below $45,000, the marginal tax saving vs 15% contributions tax is minimal (just 4% for incomes $18,201–$45,000)
- Members who need flexibility — you cannot access FHSS savings for anything other than an eligible home purchase; if plans change, you pay tax + 20% surcharge on withdrawal
- Members very close to purchase — the ATO release process takes 25+ days; this can complicate settlement timing
- Members in a very competitive market — if you need to act quickly on a property, the FHSS release delay may cause complications
The $50,000 Cap in Practice
Most first home buyers save over 3–4 years:
| Year | Contribution | Cumulative (Before Deemed Earnings) |
|---|---|---|
| 1 | $15,000 | $15,000 |
| 2 | $15,000 | $30,000 |
| 3 | $15,000 | $45,000 |
| 4 | $5,000 | $50,000 (cap) |
Plus deemed earnings accumulate each year on the contributed amounts — typically adding $2,000–$5,000 total across the period.
FHSS vs First Home Guarantee and Stamp Duty Concessions
FHSS is a separate scheme from:
- First Home Guarantee (FHBG): Allows eligible buyers to purchase with a 5% deposit without paying LMI — separate to FHSS
- First Home Owner Grant (FHOG): A one-off state/territory cash grant for eligible first home buyers — does not interact with FHSS
- Stamp duty concessions: State-based — separate to FHSS
These schemes can be combined — FHSS savings can form part of the deposit used with a First Home Guarantee.
Frequently Asked Questions
Can I use FHSS with my partner? Yes — both partners can separately use FHSS, effectively doubling the combined FHSS savings (up to $100,000 combined) for the same property purchase.
What if I decide not to buy a house after using FHSS? You can re-contribute the released amount to super within 12 months — otherwise you pay income tax on the release plus a 20% surcharge. This makes FHSS savings relatively illiquid.
Does the FHSS count toward the concessional cap? Yes — FHSS salary sacrifice contributions count toward the $30,000 annual concessional cap. Check your employer SG rate first.
For further reading: FHSS Scheme Explained in Full, FHSS Calculator. For advice on whether FHSS suits your home buying strategy, speak with a licensed financial adviser through MoneySmart.