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FHSS - Tax

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Hi Guys,

 

I have a few questions and scenarioes I am working through. If in the event I decide not to proceed with the purchase of a property due to other circumstances and require the cash in hand how does the FHSS tax Flat Rate apply? This seems currently like an unfair situation given the superfund already withholds the tax rate and you lose out when your determination is granted? (Instead of 12 months I might look at 36 Months to purchase) 

 

Current situation: 

 

Pre Tax Salary 100,000k

FY18/19 FHSS Salary Sacrafice Contributions $3,000

FY19/20 FHSS Salary Sacrafice Contributions $8,000

 

If I was to withdraw the above in the FY19/20 would my tax return be signifigantly impacted as I no longer decrease my taxable income by $8,000? 

 

Second scenario would be to withdraw the above in FY20/21 would I be in a better position finacially and from a tax perspective? 

 

In summary a new job on a contract has required me to relocate regional. I still intend the purchase a property however due to the silly FHSS rule I can't use it to buy an investment property even if I was to live in it later down the track. 

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Hi @mowy

 

Thanks for your post.

 

You have up to 12 months from the date you request your FHSS release to sign a home purchase or construction contract. If you don't sign a contract within that timeframe, we will automatically give you another 12 months. This effectively gives you 24 months to sign a contract.

 

For more information about your FHSS scheme requirements after your savings have been released, refer to our website.

 

If you don't sign a contract within the required timeframe, you have a couple of options. You can keep the money and pay the 20% FHSS tax on the assessable FHSS released amount. If you don't want to pay that tax, you can re-contribute the assessable FHSS released amount (less any tax that was withheld).

 

It is important to note that this timeframe only comes into effect when you request your FHSS release. You can take your time if you have only requested a FHSS determination. You can find out more about applying to release your savings on the FHSS scheme page.

 

With both scenarios, assuming that your salary is $100,000 in 2019-20 and 2020-21, your assessable FHSS released amount would be taxed at the same 9% rate in both years (37% plus Medicare levy minus 30% offset). This is because you would be in the 37% resident tax bracket in both years.

 

For more information about resident tax rates, have a look at the individual income tax rates page.

 

In other words, delaying the FHSS release won't make any difference to the tax rate. What it will do is increase the FHSS release amount due to the higher associated earnings calculation, plus it will give you more time to sign a home purchase or construction contract and avoid the 20% FHSS tax.

 

Once you sign a home purchase or construction contract, you must genuinely intend to occupy it as soon as practicable after purchase and for at least six of the first 12 months from when it is practicable to do so.

 

Hope this helps.

 

Thanks, ChrisR

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Hi @mowy

 

Thanks for your post.

 

You have up to 12 months from the date you request your FHSS release to sign a home purchase or construction contract. If you don't sign a contract within that timeframe, we will automatically give you another 12 months. This effectively gives you 24 months to sign a contract.

 

For more information about your FHSS scheme requirements after your savings have been released, refer to our website.

 

If you don't sign a contract within the required timeframe, you have a couple of options. You can keep the money and pay the 20% FHSS tax on the assessable FHSS released amount. If you don't want to pay that tax, you can re-contribute the assessable FHSS released amount (less any tax that was withheld).

 

It is important to note that this timeframe only comes into effect when you request your FHSS release. You can take your time if you have only requested a FHSS determination. You can find out more about applying to release your savings on the FHSS scheme page.

 

With both scenarios, assuming that your salary is $100,000 in 2019-20 and 2020-21, your assessable FHSS released amount would be taxed at the same 9% rate in both years (37% plus Medicare levy minus 30% offset). This is because you would be in the 37% resident tax bracket in both years.

 

For more information about resident tax rates, have a look at the individual income tax rates page.

 

In other words, delaying the FHSS release won't make any difference to the tax rate. What it will do is increase the FHSS release amount due to the higher associated earnings calculation, plus it will give you more time to sign a home purchase or construction contract and avoid the 20% FHSS tax.

 

Once you sign a home purchase or construction contract, you must genuinely intend to occupy it as soon as practicable after purchase and for at least six of the first 12 months from when it is practicable to do so.

 

Hope this helps.

 

Thanks, ChrisR

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Hi Chris,

 

Thank you for the response. 

 

Say if in the event 23 Months from release I still havent purchased a property, is the ammount I have to re contribute my maxiumum contribution value? (as of today $9,576.00)..or another ammount? This keeps ticking over indefinatly correct? 

 

What happens if I was to use the above ammount to purchase something other than a property but was able to re contribute the exact ammount back into my super within the 24 months? 

 

My intent is still to use the funds to assist the purchase of a home however my regional situation and being on a fixed term employment contract puts me in a holding pattern. 

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Hi @mowy

 

Thanks for your reply.

 

If you don't sign a home purchase or construction contract within the required timeframe, to avoid paying the FHSS tax you will need to re-contribute the assessable FHSS released amount (less tax withheld). This amount will be on the payment summary that we issue to you. We won't expect you to re-contribute more than that.

 

If you used the released amount for another purpose but were able to make a re-contribution within the required timeframe, you wouldn't be liable for the 20% FHSS tax.

 

It is important to note that if you don't sign a contract and choose to re-contribute instead, you need to notify us. You may still be subject to the 20% FHSS tax if you fail to do that.

 

Hope this helps.

 

Thanks, ChrisR