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FHSS Help

Newbie

Views 220

Replies 3

My Daughter is trying to buy a house. 
She has saved a reasonable deposit but we are looking for ways to increase it.

I have read so much info but I am not clear on where the benefit of after tax contributions comes from 

She will likely early around $70000 this financial year (will be higher next year as wasnt full time from June 30) and possibly is going to sign a H&L contract very soon.

So if she is to deposit $15000 of her savings into her super fund she has to request to withdraw it within 14 day I think. 
Because it is after tax contribution she withdraws the full $15000


This is where I am not sure as most examples are on before tax contributions

So she withdraws the $15000 and then what happens as I cant see where she gets a financial bonus under this, 
Please help

If she doesnt sign a contract now she may put another $15000 in in July

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 2

 

Hi @HayleeS

 

You can make contributions to your super for the First Home Super Saver Scheme for several years before needing to withdraw the funds! The 14 days you've seen refers to the time you must request a release after signing a contract (if you havent already requested a release).

 

One benefit of saving in super includes the ability to withdraw associated earnings on those savings. Some people find saving where they can easily access it mean they use those savings on other things. For example, I'm guilty for spending my savings on my hobbies, instead of saving for a rainy day. But if it's in my super, I can't touch it except for the FHSS (or other extenuating circumstances). If your daughter already has a deposit, she probably isn't like me, though.

 

The benefits are more longer-term benefits, rather than short-term benefits. It's generally more beneficial for people who don't already have an entire deposit.. Additionally, when the contributions are withdrawn, we withhold the expected marginal tax rate plus Medicare levy (less a 30% offset). If we can't estimate it, we withhold 17% (with no offset). This is the same no matter what type of contributions they are.

 

In this case, it's probably a better to use the FHSS if she ends up not signing a contract now, and signs later. Because you can release up to $15,000 of contributions per year, it would be beneficial to put $15,000 in now, and then an additional $15,000 in next July to get the most out of the FHSS scheme.

 

There may be a financial benefit to this by claiming a deduction for the contributions. If your daughter claims a deduction for contributions, it reduces her taxable income, and instead, the contributions are taxed at 15% in the fund. Again, we withhold tax when the contributions are withdrawn.

 

Since it's a big financial choice to make, we recommend speaking to a financial advisor to work out the best action for your situation.

 

You can read about the first home super saver scheme on our website.

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

 

Hi @HayleeS

 

You can make contributions to your super for the First Home Super Saver Scheme for several years before needing to withdraw the funds! The 14 days you've seen refers to the time you must request a release after signing a contract (if you havent already requested a release).

 

One benefit of saving in super includes the ability to withdraw associated earnings on those savings. Some people find saving where they can easily access it mean they use those savings on other things. For example, I'm guilty for spending my savings on my hobbies, instead of saving for a rainy day. But if it's in my super, I can't touch it except for the FHSS (or other extenuating circumstances). If your daughter already has a deposit, she probably isn't like me, though.

 

The benefits are more longer-term benefits, rather than short-term benefits. It's generally more beneficial for people who don't already have an entire deposit.. Additionally, when the contributions are withdrawn, we withhold the expected marginal tax rate plus Medicare levy (less a 30% offset). If we can't estimate it, we withhold 17% (with no offset). This is the same no matter what type of contributions they are.

 

In this case, it's probably a better to use the FHSS if she ends up not signing a contract now, and signs later. Because you can release up to $15,000 of contributions per year, it would be beneficial to put $15,000 in now, and then an additional $15,000 in next July to get the most out of the FHSS scheme.

 

There may be a financial benefit to this by claiming a deduction for the contributions. If your daughter claims a deduction for contributions, it reduces her taxable income, and instead, the contributions are taxed at 15% in the fund. Again, we withhold tax when the contributions are withdrawn.

 

Since it's a big financial choice to make, we recommend speaking to a financial advisor to work out the best action for your situation.

 

You can read about the first home super saver scheme on our website.

Newbie

Replies 1

I understand contributions can be over years, it was just checking the 14day rule for release.


Ok so she can claim the contributions as a tax deduction on the way in and still be able to use the FHsss?

 

So does this sound right then 

she would be in the 32.5% tax bracket (I have left the medicare off all calculations)

So on the way in she would have a tax deduction of $15000 x 0.325 = $4875

I think she has to ask for a letter before doing her tax to be able to claim it.

Then when she with draws it out it is taxed at 15% so she only withdraws 85%

$15000 x 0.85 - $12750

Then it is taxed at her rate of 32.5% less the 30% concession (so 2.5%)

so she would withdraw $12431

 

So she would therefore end up with 
$12431 + $4875 = $17306

Which means she comes out $2306 infront??

 

That actually looks similar to numbers I have seen elsewhere , I am hoping this is right as it now makes more sense


 

 

ATO Community Support

Replies 0

Hi @HayleeS

 

That looks correct.

 

Take a look at a similar thread we have answered about Understanding tax benefits around FHSS. Although the income differs we explain each step and show the workings.

 

Hope that helps.

 

Ari