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FHSS Tax Consequences

Initiate

Views 166

Replies 3

Hello,

 

I have some questions regarding the below scenario:

 

  1. $15k after-tax contribution to super is made in FY21. Notice of intent is filed and confirmed with superfund for the full amount, and this 15k is claimed as a deduction in 2020-2021 tax return.
  2. $15k after-tax contribution to super is made in July 2021 (FY22). Notice of intent to claim is filed and confirmed within July 2021 with superfund for the full amount.
  3. A determination is made including both of these $15k contributions, and entering them both as deductions, making the maximum release amount $25500 plus associated earnings less withholding tax. This amount is released from the superfund and received.
  4. An appropriate property in purchased within FY22.

 

My questions are:

  1. If I am a full time salaried PAYG employee having been in my role for just under 12 months, is it likely that my marginal tax rate will be estimated by the ATO, rather than having the maximum 17% tax withheld from the FHSS release amount?
  2. What would happen in the situation that, at the time of the notice of intent to claim of the 2nd $15k contribution, I believed I would not exceed concessional contribution caps by claiming the full $15k amount, but then by 2021-2022 tax time, I had exceeded it? My understanding is that you cannot submit a notice or variation of intent to claim after the amount has already been released under the FHSS. I understand this scenario is unlikely given the 5 year carry forward concessional contribution cap, but I am still curious.
  3. Is it correct that I only need to declare the FHSS income in the year that the release request is made (in above scenario, the 2021-2022 tax return)?
  4. Say my income for the 2021-2022 tax year is $80k. Will including the FHSS release amount (of approximately $25500) in this tax return make me liable to pay the Medicare Levy Surcharge if I do not have private health insurance since it will bring my income over the $90k threshold?

 

Thank you in advance!

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 2

Hi @TaxCurious2 

 

You’ve clearly done your research! Smiley Happy

 

In answer to your questions:

 

  1. When working out the tax that's withheld from your assessable FHSS released amounts, we’ll  estimate your marginal tax rate for the financial year - generally, this is based on your taxable income from a recently lodged tax return plus your assessable FHSS released amount.

    If we can’t estimate your marginal rate (e.g. if you haven’t lodged a tax return), then we’ll use the default rate of 17%.
  2. This one we’re looking into further with our technical experts and we’ll get back to you as soon as we have a response.
  3. Yes. You’ll need to include your assessable FHSS amount, and tax withheld, in your tax return for the financial year in which you requested your release. So in your example, you would include the $25,500 (plus your associated earnings) in your 2021-22 income tax return.
  4. No. Your FHSS assessable amount in not included in your income for Medicare levy surcharge purposes.  However, it's worth keeping in mind that if you make a personal contribution and claim a tax deduction for the amount, it will be considered a reportable super contribution – this would be included. So using your example amounts, in the 2021-22 financial year, your income for Medicare levy surcharge purposes would be $95,000 (your $80,000 taxable income plus your $15,000 personal super contribution which you claimed as a deduction).

 

3 REPLIES 3

Most helpful response

Former Community Support

Replies 2

Hi @TaxCurious2 

 

You’ve clearly done your research! Smiley Happy

 

In answer to your questions:

 

  1. When working out the tax that's withheld from your assessable FHSS released amounts, we’ll  estimate your marginal tax rate for the financial year - generally, this is based on your taxable income from a recently lodged tax return plus your assessable FHSS released amount.

    If we can’t estimate your marginal rate (e.g. if you haven’t lodged a tax return), then we’ll use the default rate of 17%.
  2. This one we’re looking into further with our technical experts and we’ll get back to you as soon as we have a response.
  3. Yes. You’ll need to include your assessable FHSS amount, and tax withheld, in your tax return for the financial year in which you requested your release. So in your example, you would include the $25,500 (plus your associated earnings) in your 2021-22 income tax return.
  4. No. Your FHSS assessable amount in not included in your income for Medicare levy surcharge purposes.  However, it's worth keeping in mind that if you make a personal contribution and claim a tax deduction for the amount, it will be considered a reportable super contribution – this would be included. So using your example amounts, in the 2021-22 financial year, your income for Medicare levy surcharge purposes would be $95,000 (your $80,000 taxable income plus your $15,000 personal super contribution which you claimed as a deduction).

 

Initiate

Replies 1

Thank you @NicATO. I had missed the reportable super contribution information previously - thank you for pointing me to it! I look forward to the Q2 response Smiley Happy

Community Moderator

Replies 0

Hi @TaxCurious2 

 

The answer to Question 2 is that you won't be able to lodge a variation notice with the fund as they no longer hold the contributions and would not able to process a variation to the original notice of intent. This would essentially leave you in the position of having an excess.

 

Thanks for your patience.