HOME LOANS
Guarantor home loan rates & guide
By Megan Birot
Note, this is a guide containing general information only. Please seek personalised professional advice from a qualified advisor before making significant financial decisions.
Can you use super to buy a house?
Yes, it’s possible to tap into your superannuation to buy a property – although there are strict eligibility criteria and conditions attached. Here are the three ways you can use your super to buy a house in Australia:
1
You’re a first home buyer
If you’re an eligible first-home buyer, you can withdraw some of your voluntary super contributions through the government's First Home Super Saver (FHSS) scheme.
2
You have a self-managed super fund (SMSF)
If you have a self-managed super fund (SMSF), you could buy an investment property (but not a main residence) with some of the money inside that fund.
3
You’ve reached preservation age
If you’ve reached the minimum age where you’re allowed to start accessing your super and have retired, you can take out some or all of your super to buy a property or pay off your current mortgage.
1. Buying a home through the FHSS scheme
If you’re a first home buyer, you can withdraw up to $50,000 of voluntary super contributions (along with associated earnings) through the First Home Super Saver (FHSS) scheme. You can use that money to purchase a new or existing home, but not for an investment property or vacant land (unless you have a contract to build).
Voluntary contributions are taxed at a concessional rate of 15%, instead of the marginal income tax rate (which can be as high as 45%). You can apply to have up to $15,000 of your personal super contributions from any one financial year released, and $50,000 in total, according to the Australian Taxation Office (ATO).
There are two ways you can participate in the FHSS scheme:
Salary sacrifice
You can enter into a salary packaging agreement with your employer to pay part of your salary into your super account before tax. That’s on top of the compulsory super guarantee payments your employer must make to your super fund. A salary sacrifice arrangement reduces your taxable income, so you may pay less tax on your income, according to the ATO. However, this also means you'll have less take-home pay.
Personal voluntary contributions
You can make personal after-tax contributions (from your take-home pay). You’ll be able to claim income tax deductions on your tax return.
How much extra could a first-home buyer save using the FHSS scheme?
Here’s an example of how much a first home buyer could save using the FHSS scheme provided by Mark Chapman, Director of Tax Communication at H&R Block.
“Say you’re earning $80,000 a year. You want to put $10,000 of that salary (pre-tax) towards your home deposit using the FHSS scheme. If you pay tax on that as normal and then put it in a normal bank savings account, you will pay around $3,000 of the $10,000 in tax (at 2024-25 tax rates).
“Now, if you put that $10,000 in a FHSS account instead, you will be taxed at just 15%. This means you will only pay around $1,500 in tax. That’s a substantial amount of extra money ($1,500) towards your first home instead of towards your tax bill.
“When you withdraw your money, you will get taxed at your marginal tax rate of 30% minus an offset of 30%. In effect, there’ll be nothing further to pay when you withdraw your money. In addition, the FHSS account earns interest while you have your money in it which, again, is generally paid at a higher rate than most regular bank accounts.”
FHSS eligibility & tax considerations
Who’s eligible to use the FHSS?
Eligibility criteria for the FHSS scheme include:
- You must be over 18 years of age
- You must be a first home buyer, meaning you haven’t owned property in Australia (including vacant land or investment properties)
- You must live at the property for at least six of the first 12 months you own it
- You must not have used the FHSS before
How to apply for a home loan using the FHSS
Here are the steps to follow when purchasing property through the FHSS and applying for a home loan:
- You’ll have to request a determination from the ATO (which tells you the maximum amount you can withdraw). The lender will look at the FHSS determination to assess your borrowing capacity (including your house deposit).
- You’ll need to provide income documentation to support your application. Based on this information, the lender may grant you home loan pre-approval, which is subject to the release of funds.
- You can make a release request under the FHSS scheme within 90 days of signing a contract of sale on your first home. It may take 15-20 business days to receive your funds, so keep this in mind if you need to gather your deposit quickly to make an offer on a house.
- If you make a release request before you find your dream home, you’ll generally have 12 months to sign a contract of sale or build a home. Alternatively, the ATO may grant you a 12 months extension.
Tax implications of buying a home through the FHSS
The funds you access through the FHSS will count towards your taxable income for the year you request the release, according to Mark. You’ll receive a payment summary at the end of the financial year that will show your assessable FHSS released amount, including:
- concessional contributions
- associated earnings on both your before-tax and after-tax contributions.
The ATO will withhold tax based on either:
- An amount equivalent to either 17% (if the ATO is unable to estimate your income) or;
- Your expected marginal tax rate, minus a 30% offset.
When you lodge your tax return, the ATO will determine your actual marginal tax rate for the year you requested the release and adjust your tax liability accordingly. They will consider the tax already withheld from your assessable FHSS released amount, along with the 30% tax offset.
Pros & cons of using the FHSS to buy a home
Pros
- It can help first home buyers grow their savings by allowing them to save for a home within their superannuation, offering tax advantages over saving outside of super
- Both you and your partner can use the FHSS for the same house, pooling the funds into a single deposit
- You can apply for the FHSS before you have a property in mind or sign a contract of sale, unlike other schemes like First Home Owner Grant (FHOG)
Cons
- The funds you access through the FHSS will count towards your taxable income, which means you’ll need to include it in your tax return for that financial year
- If you don’t buy a home within the scheme’s specified timeframe (usually 12 months), you may have to either recontribute your deposit to your super fund or pay a 20% FHSS tax
- If you don’t end up accessing the money to buy your first home, the funds will have to stay in your super until you retire
2. Buying a property through a SMSF
If you have a self-managed super fund (SMSF), you can use it to buy an investment property only – not a home to live in. You could potentially purchase a property outright using funds from your superannuation or take out a loan to buy an investment property via your SMSF.
A SMSF is a private superannuation fund that you manage yourself. It works like a trust and can have between one and six members, according to the ATO. Each member of the fund must be a trustee and can make decisions about how the superannuation is invested (including buying property). Around 1.1 million Australians are members of an SMSF, according to the ATO.
To buy a house through an SMSF, the property must satisfy the following criteria:
It must be purchased solely for providing retirement benefits to fund members
Known as the ‘sole purpose test’, this rule ensures that all investments made by a SMSF are strictly for the benefit of members upon retirement, not for personal use or immediate financial gain.
It must not be purchased from a related party of fund member(s)
This rule is designed to prevent conflicts of interest and ensure all transactions are conducted at arm’s length, maintaining the integrity of the fund and compliance with superannuation laws.
The property can’t be lived in by any member(s)
Any member(s) of the fund or their related parties can not reside in the property, including as a holiday home.
It must not be rented by fund members or related parties
Otherwise it would breach the ‘sole purpose test’ by providing a present-day benefit rather than preserving the asset solely for retirement purposes.
Keep in mind you cannot put an existing residential investment property you have into your SMSF. However, you can buy a commercial property through your SMSF and rent it out to your business (or that of any fund members).
Can you take out a home loan to buy a property through a SMSF?
Yes, you can take out a mortgage to acquire a property via your SMSF, using some of the money in your superannuation fund as a deposit. However, strict borrowing conditions apply.
Buying a property through an SMSF is generally done under a limited recourse borrowing arrangement (LRBA). This involves putting the investment property in what is called a ‘bare trust’ which has the legal title in the property. Beneficial ownership rests with the SMSF, which then collects all of the rental income on the property.
The reason for this arrangement is so that in the event of a default, the lender can only reclaim the asset held in the separate trust, and no other assets within the SMSF, according to Mark Chapman.
Keep in mind that you can’t use your entire super balance to buy an investment property, as most lenders will require you to keep a cash reserve. According to Mansour Soltani, Money.com.au's expert on home loans, the primary factors lenders consider when evaluating your SMSF borrowing capacity are:
- Does your SMSF have a balance of at least $100,000-$200,000 (otherwise, loan amounts may be too small for some lenders to consider).
- Will your SMSF have a ‘liquidity buffer’ equivalent to 10% of the investment property's value left over after the purchase (once all fees and charges are deducted)? You’ll need enough cash flow remaining to meet a portion of your loan repayments and for expenses like rates and property management fees.
- Does your SMSF loan have a minimum 70-80% loan-to-value ratio (LVR), meaning a 20-30% deposit? Most lenders won’t accept higher LVRs for SMSF loans.
- Do you make annual contributions to your SMSF of at least $15,000? Lenders will want to see regular contributions as this is what will service the loan.
Here’s a hypothetical example of how these calculations would work.
- Your property price is $600,000
- You need a 20% minimum deposit of $120,000
- Your loan amount would be $480,000
- You’ll need to have $60,000 in liquidity left in your super (or 10%)
So, based on this example, you’d need at least $180,000 (for your deposit and leftover liquidity) in your superannuation to buy a $600,000 property. This calculation excludes any additional costs like stamp duty and conveyancing fees.
Mansour Soltani, Money.com.au's Home Loans Expert
“It’s worth noting that SMSF loans can have a higher interest rate and more fees than regular investment property loans (including professional fees for financial or tax planning). Loan repayments will be made through your SMSF, using the rental income generated from your investment property and superannuation contributions made into the fund.”
Mansour Soltani, Money.com.au's Home Loans Expert
What should you watch out for when buying a property through a SMSF?
Mark Chapman, Director of Tax Communication at H&R Block
“There can be substantial fees and charges associated with the purchase, ownership and subsequent sale of a property in an SMSF. These will eat into your super balance so you need to ensure the income into the super fund will cover these costs and allow for growth. Many people assume that if they contribute personal monies into the purchase, that once the super fund has the money, they can repay themselves. This is not the case. You may contribute your own money to help purchase the property, but that will be counted as contributions and can’t be withdrawn until you meet preservation age and a condition of release (for example, retirement).”
Mark Chapman, Director of Tax Communication at H&R Block
SMSF eligibility & tax considerations
How to apply for a home loan through a SMSF
According to Mansour, the application process for an SMSF loan is more rigorous than for a traditional mortgage due to additional compliance checks. Typically, you'll require assistance from a mortgage broker or financial expert to navigate the process.
To apply for an SMSF loan, you’ll generally need to provide the following documentation:
- A certified copy of the SMSF Trust Deed
- A certified copy of Custodian Trust Deed
- SMSF financial statements (e.g. financial statements prepared by an accountant, 12 months of bank statements for the SMSF account, rental estimates, etc.)
- A signed contract of sale for the property
Note, that not all lenders offer SMSF non-recourse home loans, so it’s best to speak to a mortgage broker about your options. For example, major banks like Westpac and Commonwealth Bank no longer offer those products.
Tax implications of buying a property through a SMSF
Interest paid on your SMSF loan may be tax-deductible to the fund, according to the ATO.
Additionally, the rental income generated from your SMSF property will generally be taxed at a concessional rate of 15%, according to the ATO. If you hold the asset for more than 12 months, the fund may also get a capital gains tax discount of one-third – equivalent to 33.33% (when you sell).
Once fund members start receiving a pension at retirement, any rental income or capital gains arising from the SMSF will be tax free, according to Mark Chapman.
If the investment property within your SMSF is negatively geared (where property expenses exceed income), a taxable loss can be carried forward each year to offset future taxable income within the fund. Although, keep in mind that capital losses on your SMSF property don’t offset your personal taxable income outside the fund.
Pros & cons of using your SMSF to buy a home
Pros
- The interest component of your loan repayments may be tax-deductible
- Rental income is typically taxed at a concessional rate of 15% within the SMSF and can be tax-free once the SMSF enters the pension phase
- You can use your SMSF to buy commercial or residential properties to diversify your portfolio
Cons
- Investing in property through an SMSF can be expensive, including higher loan interest rates, operational expenses, legal fees, etc
- Buying property through an SMSF is a highly regulated process and will likely require professional financial/tax advice
- There are restrictions on the type of property you can buy within a SMSF, and what the property is used for (e.g. it must meet the 'sole purpose test')
3. Withdrawing your super when you retire to buy a house
Once you reach preservation age (between 55 and 60, depending on your birth date) and retire, or after you turn 65 if you’re still working, you can withdraw some or all of your super and use it however you want. This includes to buy a house or to pay off your current mortgage.
However, keep in mind that taking out your super as a lump sum may reduce your retirement income (as opposed to using your super as an income stream).
Mark Chapman, Director of Tax Communication at H&R Block
“It may make sense to use your super to pay off an outstanding debt such as a mortgage (once you can actually access it). This will mean you have less money available to live on in pension payments, but on the other hand you won’t have to pay the mortgage every month and you’ll save on the mortgage interest, which depending on the outstanding balance could amount to hundreds or even thousands of dollars saved each month.”
Mark Chapman, Director of Tax Communication at H&R Block
Eligibility & tax considerations of buying property with super after retirement
Can you get a home loan to buy property after you retire?
You can use your superannuation money to buy a property outright (if you have the funds available) or as a deposit for a home loan. However, you may not always be able to get a mortgage if you’re over 60, as lenders willing to approve long-term loans for seniors are limited, according to Mansour.
“It really depends on the lender. For example, ANZ will consider borrowers over 65. If you've got substantial savings, a stable retirement income or assets you can sell to help repay the loan, then lenders may be favourable to your application.”
— Mansour Soltani, Money.com.au's Home Loans Expert & Director of Soren Financial.
Tax implications of buying a property with your super after you retire
If you're over 60, super lump sum payments are usually tax-free. If you’re under 60, you won’t pay tax if you withdraw up to the 'low rate cap', currently $260,000 for the 2025-26 financial year, according to the ATO.
Any amounts over the low rate threshold will be taxed at 15% (including the Medicare levy) or your marginal tax rate, whichever is lower.
Once you take out your super as a lump sum, it’s no longer considered to be super. This means that if you choose to invest the funds, you may need to declare it on your tax return. For instance, you might need to pay capital gains tax when buying and selling property (unless it’s your main residence) or pay tax on interest earned from term deposits or high-interest savings accounts.
Pros & cons of using your super to buy a home after you retire
Pros
- There are no restrictions on the type of property you can buy with your super after you retire
- Depending on your super balance, you could have enough funds to buy a home outright or have a substantial deposit which could reduce your LVR (and get you a better interest rate on your home loan)
- You can take out your super after you retire to pay off your existing mortgage, or undertake renovations on your existing home to increase its value
Cons
- Getting a mortgage after you retire can be difficult as some lenders worry that the loan term could extend beyond your capacity to repay the loan
- Taking out a mortgage in retirement could cause financial stress if other unexpected expenses such as healthcare or aged care services arise
- You may have to pay full capital gains tax if you buy and sell an investment property outside your super
