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First home super saver - contract before determination

Newbie

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The ATO website states a FHSS determination must be made before a contract is signed.

It's a shame that CRUICAL piece of information is not included in the 'Am I Elligible?' section.

I feel for those who have signed a contract, without already having a determination done, and literally applied a day or two later for a determination and release. The government obviously doesn't realise people find out information late or the way things are worded (see above) is interpreted differently. Why has the government made it so difficult for people to access their hard earned savings by merely not 'pressing a button' prior to signing a contract. Extra savings assist people in lowering the deposit they need, lowering the LMI required, relieving financial burden. But let's throw a hurdle in there to catch people out. I dare say that there's a large cohort of people that really 'appreciate' what the government has done.

 

My question is:

The website says "a determination must be made before signing a contract" but WHERE does it say that IN THE LAW??

 

I've seen other posts refer to the "law". I've read the "law" and it's not mentioned anywhere that a determination must occur before a contract is signed in that chronological order.

 

Other moderators have mentioned:

SECTION 138-10   FIRST HOME SUPER SAVER DETERMINATION  

138-10(1)  
A first home super saver determination is a written determination stating:

(a) your *FHSS maximum release amount; and

(b) the amount of each of the following components that make up your FHSS maximum release amount:

(i) your *concessional contributions;

(ii) your *non-concessional contributions;

(iii) your associated earnings.

138-10(2)  
You may request the Commissioner, in the *approved form, to make a *first home super saver determination if:

(a) you have never held:

(i) a freehold interest in real property in Australia; or

(ii) a lease of land in Australia (including a renewal or extension of such a lease) as described in paragraph 104-115(1)(b) of the Income Tax Assessment Act 1997 ; or

(iii) a company title interest (within the meaning of Part X of the Income Tax Assessment Act 1936 ) in land in Australia; and

(b) you are 18 years or older; and

(c) you have not previously requested a release authority under Division 131 in relation to a first home super saver determination that has been made in relation to you.

 

As you can see...nothing specifies chronological order.

 

I've also read the Law Companion Ruling LCR 2018/5

That mentions:

Obligations following the request for release of an amount under the FHSS scheme
26. The FHSS scheme broadly requires the released amount to be used to purchase
your first home. Therefore, the following conditions must be met under the scheme28:
• you receive a FHSS determination and you make a valid request for the
release of an amount of superannuation in relation to that determination.28A
This must be your first such request
• you enter into a contract to purchase or construct a CGT asset that is a
residential premises(29), located in Australia, within the period beginning
14 days before the day you make the valid request for release, and ending
12 months after the day you make the valid request for release (or a further
period allowed by the ATO)29A
• the price for the purchase or construction of the premises is at least equal to
the total amount to be released that is stated in the valid request for release
• you have occupied the premises, or intend to occupy the premises as soon
as practicable
• you intend to occupy the premises for at least six months of the first
12 months after it is practicable to occupy the premises. Determining when
it is ‘practicable’ to occupy the premises will depend on the facts and
circumstances of a particular case. However, it is necessary for your
intention to occupy the premises for the requisite period of time to be
genuine30, and
• you notify the ATO in the approved form of the matters outlined above within
28 days (or further period allowed by the ATO) after you enter into the
contract to purchase or construct the residential premises.
27. The Commissioner may extend the period for entering into a contract by up to
12 months.31
28. Where you do not meet the conditions in paragraph 26 of this Ruling following the
valid request for release of an amount under the FHSS scheme, you will be subject to
FHSS tax32 unless you:
• make non-concessional contributions within the period beginning 14 days
before the day you make the valid request for release, ending 12 months
after the day you make the valid request for release (or further period
allowed by the ATO)32A

 

Again...it mentions that a determination must be made and a contract signed within 14 days of a release request, but nothing that specifies that a determination must be made BEFORE signing a contract.

 

I'd love to be proven wrong.

Can anyone specifically mention where IN THE LAW it states that a determination must be made prior to a contract being signed??

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ATO Certified Response

ATO Community Support

Replies 2

Hi @Glen21


We value your feedback and appreciate the time you’ve taken to look into your question.


The legislation covers this in Treasury Laws Amendment Act 2017, section 138‑10:


(2) You may request the Commissioner, in the approved form, to make a first home super saver determination if: (a) you have never held: (i) a freehold interest in real property in Australia

 

What this means is if the person has never held freehold interest, they can request a determination from the Commissioner.

 

The Australian Trade and Investment Commission explains freehold as:

 

Freehold land (or fee simple) provides people with the most complete form of ownership of that land, in perpetuity. It allows the land holder to deal with the land including selling, leasing, licensing or mortgaging the land, subject to compliance with applicable laws such as planning and environment laws. Notwithstanding, ownership of everything associated to the land is not absolute, as the States and Australian Government are empowered to withhold certain rights, such as the right to any minerals or petroleum located on the land.

 

Therefore, a signed contract is a freehold interest. This means that once a contract is signed, a determination request cannot be made.

 

Our webpage for FHSS talks about this and is linked at the top of the FHSS page in online services.


The first question of the determination form covers this too. It says: Do you currently hold an interest in real property located in Australia? Again, a contract is an interest.
 


Treasury Laws Amendment Act 2017

Australian Trade and Investment Commission: Freehold Land

3 REPLIES 3

Most helpful response

ATO Certified Response

ATO Community Support

Replies 2

Hi @Glen21


We value your feedback and appreciate the time you’ve taken to look into your question.


The legislation covers this in Treasury Laws Amendment Act 2017, section 138‑10:


(2) You may request the Commissioner, in the approved form, to make a first home super saver determination if: (a) you have never held: (i) a freehold interest in real property in Australia

 

What this means is if the person has never held freehold interest, they can request a determination from the Commissioner.

 

The Australian Trade and Investment Commission explains freehold as:

 

Freehold land (or fee simple) provides people with the most complete form of ownership of that land, in perpetuity. It allows the land holder to deal with the land including selling, leasing, licensing or mortgaging the land, subject to compliance with applicable laws such as planning and environment laws. Notwithstanding, ownership of everything associated to the land is not absolute, as the States and Australian Government are empowered to withhold certain rights, such as the right to any minerals or petroleum located on the land.

 

Therefore, a signed contract is a freehold interest. This means that once a contract is signed, a determination request cannot be made.

 

Our webpage for FHSS talks about this and is linked at the top of the FHSS page in online services.


The first question of the determination form covers this too. It says: Do you currently hold an interest in real property located in Australia? Again, a contract is an interest.
 


Treasury Laws Amendment Act 2017

Australian Trade and Investment Commission: Freehold Land

Newbie

Replies 1

Hi BlakeATO

 

Thank you for a response

 

Again, I highlight just how confusing this 'helpful' scheme is to everyday Australians.

 

Can you then please clarify, if people are able to use this scheme to build a house how are they able to do this if they already own a block of land? Surely that is a freehold interest? This would negate their eligibility would it not?

How also can a 'building contract' be classified as a freehold interest?

 

Thanks

Newbie

Replies 0

Disregard this.

 

Have found the answer.

 

Turns out I'm correct. A determination must be made PRIOR to owning land....i.e a freehold interest (there it is again!)

 

I mean...has anyone actually reviewed this and looked at it from the people that are trying to use the scheme?

 

Scenario: Person A buys a block of land. Period of time for settlement/Title (1-6 months). Building process (6-18+ months) including design, assessments, permits, re-assessments as required, changes due to personal/financial circumstances. Then finding a builder who is able to fit in a new home build in a reasonable time...then the contract arrives. Let's not factor in what the COVID/homebuilder grants did to timeframes.

Yet the requirements are 12 months to have a contract signed. Yes there is the 'possibility of an extension, but that isn't guaranteed.

 

If people are going to use their super for their house build why would they apply for a determination before they've even purchased the very land to build on?

 

It baffles me that this scheme is so technical and hard to access. The question is "why"?

 

I know why. It's because the government doesn't want people to withdraw from their super. Why? Because that's more money in pensions they'll have to pay because people have lower super balances.

 

The scheme honestly needs an overall. It's ridiculous.