FHSS vs Bank Savings: Which is Better for Your Deposit?

The First Home Super Saver (FHSS) scheme lets you save for a home through superannuation with significant tax advantages. Here's how it compares to a regular savings account.

FHSS (Super) Bank Account
Tax on contributions 15% contributions tax Your marginal rate (up to 47%)
Earnings rate ~6.6% (SIC rate) ~4.5% (taxed at marginal rate)
Flexibility Locked until home purchase Access anytime
Annual limit $15,000 per person No limit
Lifetime limit $50,000 per person No limit
Withdrawal tax Marginal rate minus 30% None

How FHSS Saves You Money

FHSS works by converting your income from high-taxed personal income to low-taxed super contributions. Instead of paying your marginal tax rate (e.g., 37%), you only pay 15% contributions tax.

Saving $15,000 via Bank

At 37% marginal rate:

  • Pre-tax income needed: $23,810
  • Tax paid: $8,810
  • After-tax savings: $15,000

Saving $15,000 via FHSS

At 15% contributions tax:

  • Pre-tax contribution: $15,000
  • Tax paid: $2,250
  • In super: $12,750
  • Tax saved: $3,300

The Catch: 85% Release Rule

When you withdraw from FHSS, you only get 85% of your concessional contributions released (because 15% was already taxed as contributions tax). The released amount is then taxed at your marginal rate minus a 30% offset.

Example: If your marginal rate is 37%, your effective withdrawal tax rate is only 7% (37% - 30%). Even with this, FHSS typically comes out ahead.

When FHSS Makes Sense

  • Your marginal tax rate is 32% or higher
  • You're saving for 2+ years before buying
  • You're committed to buying a home in Australia
  • You want to boost your deposit with tax savings

When to Use a Bank Account Instead

  • You might need the money for non-housing purposes
  • You're on a low tax rate (19% or less)
  • You're buying very soon (FHSS release takes 2-4 weeks)
  • You're uncertain about buying a home

Calculate Your FHSS Savings

See exactly how much you could save with FHSS compared to a bank account.

FHSS Calculator

Frequently Asked Questions

How much can I save with FHSS compared to a bank account?

The savings depend on your marginal tax rate. At a 37% marginal rate, saving $15,000 via FHSS instead of a bank account saves about $3,300 in tax over the contribution year. Over multiple years, the total benefit can exceed $10,000.

What if I don't end up buying a home?

If you don't buy a home, you can leave the money in super until retirement, or withdraw it with a 20% tax penalty on the concessional contributions portion. You won't lose the money, but you'll pay extra tax if you withdraw for non-housing purposes.

Can couples both use FHSS?

Yes, each person can contribute up to $15,000 per year and $50,000 lifetime to FHSS. A couple buying together can access up to $100,000 combined, plus associated earnings. Each person applies separately to the ATO for their release.

When should I NOT use FHSS?

Avoid FHSS if you might need the money for non-housing purposes, you're on a low marginal tax rate (15% or less), you're planning to buy very soon (FHSS release takes 2-4 weeks), or you're unsure about buying a home in Australia.