Announcements
Looking for information on the JobKeeper extension? Check out our answers to common questions the community has been asking.

ATO Community

FHSSS & HECS

Highlighted

Newbie

Views 6257

Replies 3

Hi

 

I’d like some clarity on the release of funds contributed to the FHSSS.

 

The ATO’s website states that once an applicant has applied to release their funds from the scheme, the money will be used to offset any existing commonwealth debts.

 

As the vast majority of first home buyers have HECS debts, I’m concerned that a lot of young people applying for a release are unaware of this.

 

Once an application is made to release the funds from the FHSSS, the ATO gives the participant 12 months to sign a contract to buy a house - but how are first home buyers supposed to do that if the $15,000 or $30,000 contributed to the FHSSS (which would typically contribute to a home deposit is soaked up with HECS repayments?).

 

It doesn't make sense to be given an $2,000 – 3,000 tax incentive to contribute to a house deposit, whilst the ATO turn around and take $15,000 or $30,000 (being the whole amount contributed).

 

Some guidance would be appreciated in relation to this, as I’m not sure repaying my HECS is feasible whilst saving for a home, but then neither is waiting until retirement to buy.

 

It would be greatly appreciated if someone could confirm if HECS are caught up in the rpayment of commonwealth debts upon relase of FHSSS moneys, and/or escalate the matter to those involved in setting out the intricate details of the FHSSS.

 

Thank you

 

 

1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Most helpful response

ATO Certified Response

Community Support

Replies 0

Hi @Haydenm1,

 

Thanks for your post.

 

Any amounts you withdraw from your super fund as part of the FHSS scheme will be used to pay your outstanding Commonwealth debts.

 

“Commonwealth debts” can include:

  • Income tax debt
  • Certain business (or integrated client) account debts, including activity statement debt
  • Centrelink debts, and
  • Child Support Agency debts.

Amounts released as part of FHSS won’t be used to pay down the account balance of your higher education or trade support loan (e.g. HELP, SFSS or TSL).

 

However, if you have an income tax debt which includes a compulsory repayment for your study loan, then part of your released FHSS amounts will be used to pay this compulsory repayment as it forms part of your income tax debt.

 

Consider the following example, where you have:

  • An outstanding income tax debt of $2000 (which includes a compulsory HELP repayment of $500), and
  • A HELP loan account balance of $5,000.

If you withdraw $10,000 from the FHSS scheme, then $2,000 would be offset from the total amount to pay the income tax debt. This $2000 includes the $500 compulsory HELP repayment. After the $2000 has been offset, the FHSS amount remaining is $8,000.

 

No additional amounts would be paid towards the HELP loan.

 

This is a simplified example, because it doesn’t take into account any PAYG withholding that would apply to the released FHSS amount. Hopefully, this example helps explain the limited circumstances where you may have higher education compulsory repayments offset.

 

Thanks, NicM.

3 REPLIES 3
Highlighted

Devotee

Replies 2

Hi @Haydenm1

 

Welcome to our Community!

 

When you withdraw (release) contributions under the FHSS scheme they will not be part of your HECS repayment income in the year you request the withdrawal of your super under the FHSS.

 

FHSS released amounts will impact Commonwealth Debt such as Centrelink, child support, ATO income tax account (ITA) debts, and  ATO integrated client account (CAC) debts.

 

Please note: If you are contributing to your super via salary sacrifice, those contributions aka 'reportable employer super contributions' can increase your HECS repayment income for the year/s you make those contributions (not when you release/withdraw them). Check out the 'Study and training support loans' heading further down the page here.

 

Hope this helps.

 

 (Disclaimer - ATO employee helping voluntarily)

Highlighted

Newbie

Replies 1

Thanks @Miccles,

 

So HECS Debts are definately not classified as commonwealth debts?

Highlighted

Most helpful response

ATO Certified Response

Community Support

Replies 0

Hi @Haydenm1,

 

Thanks for your post.

 

Any amounts you withdraw from your super fund as part of the FHSS scheme will be used to pay your outstanding Commonwealth debts.

 

“Commonwealth debts” can include:

  • Income tax debt
  • Certain business (or integrated client) account debts, including activity statement debt
  • Centrelink debts, and
  • Child Support Agency debts.

Amounts released as part of FHSS won’t be used to pay down the account balance of your higher education or trade support loan (e.g. HELP, SFSS or TSL).

 

However, if you have an income tax debt which includes a compulsory repayment for your study loan, then part of your released FHSS amounts will be used to pay this compulsory repayment as it forms part of your income tax debt.

 

Consider the following example, where you have:

  • An outstanding income tax debt of $2000 (which includes a compulsory HELP repayment of $500), and
  • A HELP loan account balance of $5,000.

If you withdraw $10,000 from the FHSS scheme, then $2,000 would be offset from the total amount to pay the income tax debt. This $2000 includes the $500 compulsory HELP repayment. After the $2000 has been offset, the FHSS amount remaining is $8,000.

 

No additional amounts would be paid towards the HELP loan.

 

This is a simplified example, because it doesn’t take into account any PAYG withholding that would apply to the released FHSS amount. Hopefully, this example helps explain the limited circumstances where you may have higher education compulsory repayments offset.

 

Thanks, NicM.