First Home Super Saver Scheme: Withdrawal Rules and Contribution Caps for 2025

As of 1 July 2024, the Australian Taxation Office began applying a revised set of administrative rules to the First Home Super Saver (FHSS) scheme, altering both the maximum releasable amount and the way associated earnings are calculated. These changes, which remain in effect through the 2024–25 financial year and into 2025, directly affect how much a first-home buyer can withdraw from voluntary superannuation contributions to fund a deposit. The shift is significant because it coincides with a period of elevated interest rates—the Reserve Bank of Australia held the cash rate at 4.35% throughout late 2024—and persistent housing affordability pressure in capital cities. Under the updated parameters, an individual can release up to $15,000 of eligible voluntary contributions from any single financial year, with a total cap of $50,000 across all years. The ATO’s recalibrated shortfall interest charge rate, used to determine deemed earnings on released amounts, now tracks the 90-day Bank Accepted Bill rate plus a 3% margin, replacing the previous formula. For applicants lodging a FHSS determination in early 2025, this means the net withdrawal amount reflects both the higher contribution caps introduced in 2022 and a more conservative earnings accrual methodology. Understanding the precise withdrawal sequence, the interaction with the concessional contributions cap of $30,000 for 2024–25, and the tax treatment of released funds is essential for anyone intending to use the scheme as part of a deposit strategy in the current regulatory cycle.

Eligibility and Contribution Caps for 2025

Who Qualifies for a FHSS Release

An applicant must be at least 18 years old and must never have held a freehold interest in real property in Australia, including an investment property or commercial land. The ATO requires that the individual has not previously requested a FHSS release, except where a prior release was returned in full to the superannuation fund. The property being purchased must be a residential premises located in Australia, and the applicant must intend to occupy it as their main residence for at least six of the first 12 months after settlement. These conditions are verified at the time of the FHSS determination, not at the time contributions are made. Joint applicants—such as a married couple or two siblings—can each access their own FHSS cap independently, potentially doubling the total deposit pool to $100,000 before deemed earnings are added.

Annual and Lifetime Contribution Limits

The maximum amount of eligible voluntary contributions that can be counted toward the FHSS scheme in a single financial year is $15,000. This applies from the 2017–18 financial year onward, though contributions made before 1 July 2017 are not eligible. The total cap across all financial years is $50,000 per individual. Eligible contributions include:

• Concessional (before-tax) contributions, such as salary sacrifice arrangements and personal deductible contributions claimed under section 290-150 of the Income Tax Assessment Act 1997.
• Non-concessional (after-tax) contributions, but only to the extent that they do not exceed the $15,000 annual FHSS limit.

Mandatory employer Superannuation Guarantee contributions are not eligible and cannot be released. The ATO’s determination process automatically identifies which contributions qualify by matching fund-reported data against the individual’s tax file number.

Interaction with the Concessional Contributions Cap

For the 2024–25 financial year, the general concessional contributions cap is $30,000 (indexed from $27,500 in 2023–24). Voluntary concessional contributions made under the FHSS scheme count toward this cap. If an individual salary-sacrifices $15,000 in 2024–25 specifically for FHSS purposes, that amount consumes half of the annual concessional cap. Exceeding the cap triggers an excess concessional contributions determination, which results in the excess amount being included in the individual’s assessable income and taxed at their marginal rate, plus an excess concessional contributions charge. The ATO’s online services portal allows real-time monitoring of year-to-date concessional contributions to prevent breaches.

Withdrawal Rules and the Release Process

Step-by-Step Release Sequence

The FHSS withdrawal process follows a strict administrative sequence administered by the ATO, not the superannuation fund. The steps are:

1. Request a FHSS determination: The applicant logs into ATO online services via myGov and requests a determination. The ATO calculates the maximum releasable amount based on eligible contributions and associated earnings. A determination is valid for 12 months and can be requested multiple times before a release is initiated.
2. Apply for a FHSS release: After receiving a determination, the applicant submits a release request. The ATO issues a release authority to the applicant’s superannuation fund(s), instructing them to transfer the specified amount to the ATO.
3. Payment to the applicant: The ATO deducts applicable withholding tax and credits the net amount to the applicant’s nominated bank account. The entire process typically takes 15 to 25 business days from the release request, according to ATO service standards published in September 2024.

Ordering and Composition of Released Funds

The ATO does not allow an applicant to select which contributions are released. The release amount is calculated by taking the oldest eligible contributions first, regardless of whether they are concessional or non-concessional. The total release comprises:

• 100% of eligible non-concessional contributions (up to the $15,000 per-year and $50,000 lifetime caps).
• 85% of eligible concessional contributions (reflecting the 15% contributions tax already deducted within the fund).
• Deemed earnings on both contribution types, calculated at the 90-day Bank Accepted Bill rate plus 3 percentage points (the shortfall interest charge rate), as confirmed by ATO guidance updated 1 July 2024.

The 85% rule for concessional contributions means that if an individual contributed $10,000 in concessional amounts in 2023–24, the net amount counted toward the FHSS release is $8,500. The remaining $1,500 stays in the superannuation system.

Withholding Tax on Released Amounts

The ATO withholds tax on the released amount at the applicant’s marginal tax rate less a 30% offset. The offset is applied to the assessable component of the release—specifically, the concessional contributions and the deemed earnings. Non-concessional contributions are not subject to withholding because they were contributed from after-tax income. The ATO calculates the withholding amount and includes it in the individual’s income tax return for the year of release. Any over-withholding is refunded upon assessment. For example, an individual on a 32.5% marginal rate (plus 2% Medicare levy) would face a net withholding rate of 4.5% on the assessable component (34.5% minus 30% offset).

Tax Implications and Deemed Earnings

How Deemed Earnings Are Calculated

Deemed earnings are not the actual investment returns earned within the superannuation fund. Instead, the ATO applies a formula based on the shortfall interest charge (SIC) rate, which is updated quarterly. For the October–December 2024 quarter, the SIC rate was 7.38% p.a., comprising the 90-day Bank Accepted Bill rate of 4.38% plus the 3% margin. The earnings are calculated from the date each eligible contribution was made until the date of the FHSS determination request. The formula uses daily compounding. If an individual contributed $15,000 on 1 July 2022 and requested a determination on 1 January 2025, the deemed earnings would accrue over approximately 2.5 years at the prevailing SIC rates for each quarterly period. The ATO provides a FHSS estimator tool within myGov that applies the actual quarterly rates to contributions reported by the fund.

Tax Treatment of the Assessable Component

The assessable component of a FHSS release includes:

• The concessional contributions portion (before the 15% contributions tax deduction).
• 100% of the deemed earnings.

This assessable amount is added to the individual’s taxable income for the financial year in which the release occurs. The 30% tax offset reduces the tax payable on this amount, but the offset is non-refundable—it cannot reduce total tax liability below zero. The Medicare levy of 2% applies to the assessable component without any offset. Individuals should consider whether the release year is a high-income year; if the additional assessable income pushes them into a higher marginal bracket, the net tax cost increases.

Reporting Obligations

The ATO issues a PAYG payment summary—individual non-business (NAT 0046) for the FHSS release, showing the gross released amount, the assessable component, and the tax withheld. The applicant must include these figures in their tax return for the relevant year. If the property is not purchased within 12 months of the release (or a further 12-month extension granted by the ATO), the individual must either recontribute the released amount to superannuation or pay FHSS tax—a flat 20% penalty on the assessable component of the release, in addition to the standard income tax treatment. The ATO’s FHSS tax is administered under section 313-45 of the Income Tax Assessment Act 1997.

Strategic Considerations for 2025

Timing the Determination and Release

The date of the FHSS determination locks in the deemed earnings calculation. In a period of declining interest rates, delaying a determination request can reduce the deemed earnings amount, which in turn reduces the assessable component and the tax payable. Conversely, if the SIC rate is rising—as occurred through 2022 and 2023—an earlier determination may be advantageous. The determination is valid for 12 months, so an applicant can secure a favourable earnings calculation well before they are ready to purchase. The release itself should be timed to align with the property settlement date; funds must be used within 12 months of release, and the ATO requires notification of the property purchase within 28 days of signing the contract of sale.

Maximising Contributions Across Multiple Years

An individual who contributes $15,000 per year in eligible voluntary amounts can reach the $50,000 cap in just over three financial years. However, the $15,000 annual limit applies per financial year, not per calendar year. Contributions made in June 2025 and July 2025 fall into different financial years and each count toward their respective annual limits. For couples, coordinating contributions so that each partner maximises their $50,000 cap can produce a combined release pool of $100,000 plus deemed earnings, which may cover a 20% deposit on a property valued at $500,000 to $600,000, depending on location. The ATO’s FHSS scheme does not restrict how the funds are used within the property purchase—they can cover the deposit, stamp duty, or other settlement costs.

Avoiding Common Administrative Errors

The ATO’s 2023–24 annual report noted that the most frequent reason for FHSS release delays was a mismatch between the fund-reported contribution data and the applicant’s tax return. Voluntary concessional contributions must be reported by the fund and included in the individual’s tax return before the ATO can verify them. A notice of intent to claim a deduction under section 290-170 must be lodged with and acknowledged by the superannuation fund before the FHSS determination is requested. Failure to do so results in the contribution being classified as non-concessional, which may cause the individual to exceed the $15,000 annual cap if they have also made after-tax contributions in the same year.

Actionable Steps for 2025

1. Request a FHSS determination through myGov before 30 June 2025 to lock in the current deemed earnings calculation, even if the property purchase is not imminent. The determination is valid for 12 months and establishes the maximum releasable amount under the rules in effect at that date.
2. Verify all contribution data with the superannuation fund before lodging a release request. Ensure that any personal deductible contribution notices of intent have been submitted and acknowledged. The ATO’s online services display the contribution data matched from the fund; discrepancies must be resolved with the fund directly.
3. Calculate the net-after-tax release amount using the ATO’s FHSS estimator tool rather than relying on the gross cap figures. The interaction between the 85% concessional contribution rule, deemed earnings, and withholding tax means the amount credited to the bank account will be lower than $50,000 even if the cap is fully utilised.
4. Coordinate contribution timing with a partner if purchasing jointly. Each individual has an independent $50,000 cap, and contributions can be structured across different financial years to optimise tax outcomes, particularly if one partner is in a higher marginal tax bracket and benefits more from the concessional contribution deduction.
5. Set a calendar reminder for the 12-month property purchase deadline from the date of release. If a purchase is delayed, apply to the ATO for a 12-month extension before the initial period expires. Failure to purchase or obtain an extension triggers the FHSS tax liability, which is assessed automatically when the ATO’s systems detect no property notification within the deadline.