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Tips and how-tos

How to save within your super for your first home

Justin McMillan, Guest blogger, Smartwealth

01 May 2019 • 4 min 30 sec

This post was prepared by Justin McMillan of Smartwealth (, on behalf of Keystart Home Loans. Smartwealth is a corporate authorised representative of RI Advice, AFSL 328429.

How to save within your super for your first home

...and reduce your taxes too

You’ve probably heard of salary sacrificing and you may be aware that you can save on your income tax through salary sacrifice into your superannuation.  You might think salary sacrifice is only for higher income earners.  Not so. You may benefit from salary sacrificing and it may also allow you to get in your first home sooner.

What is salary sacrifice?

Superannuation salary sacrifice is a voluntary arrangement between an employee and employer, where the employee foregoes take-home pay.  Instead these salary payments are directed into the employee’s superannuation.

The tax benefits of salary sacrificing

In addition to increasing your super savings, a major benefit of salary sacrificing is the potential tax savings. Salary sacrifice comes out of your salary before it is taxed and is referred to as “pre-tax”.  These pre-tax salary sacrifice contributions into your superannuation are taxed at 15% rather than at your normal marginal income tax rates.  

This table shows the different tax rates, based on the Individual tax rates in 2018-19

Income Marginal
income tax rate
Contribution tax for pre-tax superannuation contributions Potential tax savings
$0 - $18,200
$18,200 - $37,000 19%15%4%
$37,001 - $90,00032.5%
$90,001 - $180,00037%15%22% 
$180,001 +45%15% 30%

Please note the above is for illustration purposes and does not take into consideration the following:

  • The Medicare levy & surcharge
  • Division 293 tax – additional 15% tax on certain super contributions if your income is over $250,000
  • Low income super tax offset

What is the First Home Super Saver Scheme? 

In 2017 the Federal government announced a new scheme to allow first homebuyers to use their super account to save some of the money they need for a home deposit, inside the lower-taxed environment of the superannuation system. 

The First Home Super Saver Scheme (FHSSS) is now law and eligible Australians have been able to make super contributions since 1 July 2017. Since 1 July 2018, any super contributions made to a super account under the FHSSS can be accessed to be used towards the purchase of a first home, subject to other eligibility rules.

Who is eligible?

You can start making super contributions from any time, however there are criteria you must meet to request a release of amounts under the FHSS. You need to 

  • be 18 years of age or older 
  • have never owned property in Australia, and
  • have not previously requested a FHSSS release authority in relation to the scheme.

Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSSS contributions to purchase the same property

Let’s look at an example

Sara is employed as a teacher and earns $70,000 per year. Sara’s employer pays her compulsory employer superannuation contribution.  The following outlines how Sara can benefit from the FHSSS scheme by entering into a salary sacrifice arrangement with her employer.

Without salary sacrifice

Taxable income with no salary sacrificing 

Employer will pay $6,650 in compulsory superannuation contributions.

Total personal tax payable$14,297
Tax payable on superannuation contributions $997 ($6,650 x 15%)
Total tax payable$15,294*


With salary sacrifice

Taxable income with salary sacrifice of $15,000 p.a.

($70,000 less $15,000 salary sacrifice contributions)
Employer will still be paying $6,650 compulsory super contributions.

Total personal tax payable$9,422
Tax payable on superannuation contributions $3,248 ($21,650 x 15%)
Total tax payable$12,670*
Potential tax saving $2,624*

* This does not take into consideration of the 2% Medicare levy.

If you are self-employed, you can make a contribution to superannuation and claim it as a tax deduction, which will also have the above benefits.

What to consider

Before you enter into a salary sacrificing arrangement you should consider these points.

  • Some employers may not offer salary sacrifice arrangement to their employees.
  • A maximum of $25,000 per year can be contributed to superannuation pre-tax (known as deductible contributions).  This includes both salary sacrifice and employer compulsory Superannuation Guarantee contributions.
  • Salary sacrificing may result in a reduction on Superannuation Guarantee contributions as employers may pay the 9.5% compulsory contribution on your income after the salary sacrifice amount is deducted.
  • Check that your nominated superannuation fund/s will release the contributions under the FHSSS scheme.
  • Investigate with your superannuation fund about any fees, charges and insurance implications that may apply.
  • Be aware that if you receive FHSSS amounts, it will affect your tax for the year in which you make the request to release. 

Gaining access to your super 

You can check your balance with your super fund/s at any time to see how much you have saved. This will help you keep track of the maximum FHSSS amounts you can have released.
When you are ready to receive your FHSSS amounts, you need to apply to the Commissioner of Taxation for the release of your funds. You can find out more about this process and more about the scheme on the Australian Taxation Office website

If you are looking to save for your first home, you may wish to consider the  FHSSS scheme. However, this scheme benefits individuals differently dependent on your individual situation.

Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. The examples given in this post are provided for illustrative purposes only. 

Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. Any examples given in this post are provided for illustrative purposes only.