Hi there,
Could you please help me understand how FHSS is taxed, looking at the following scenario (FY24-25 tax rates).
Let's say your income is $100k, and you release $40k via FHSS, so your total income is $140k.
You've been bumped into the next tax bracket, but only by $5k as the threshold is $135k.
Would your entire $40k release get taxed at the higher rate?
Or would the first $35k get taxed at the lower rate, and just the top $5k get taxed at the higher rate?
I understand that at the time of release, withholding tax is calculated entirely at the higher rate for the whole amount.
But what I'm interested in is what happens at tax time after everything is properly done.
At tax time, would it understand that the bottom $35k should have been taxed at the lower rate, and so give me a deduction for overpayment?
Or even at tax time, will the "tax the whole amount at the higher rate" approach still be the right one?
Thanks
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