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High released amount

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Hi,

I believed I have got too much out of the FHSSS.
In August 2019 I made a Non-Concessional contribution to my Super account of $15,000 out of my personal savings.

In August 2020, I have then made another $15,000 contribution from my savings, this time applying for the tax deduction. So, the second contribution has been treated as a Concessional one, and correctly 15% tax (ie. $2,250) has been applied to this second amount received by my Super fund, making the net contribution to be $12,750.
Summing up the 2 amounts ($15,000 + $12,750), I had contributed for a total of $27,750 in 2 consecutive financial years.
At the end of 2020, I was finally able to apply for determination and release of this money from my Super fund via the FHSSS. The amount provided by the determination (30th October, 2020) was $30,839.
On the 16th of November then I have received the confirmation from ATO that $30,777 had been released to my bank account.

According to my understanding, the determined amount of $30,839 should be the sum of my contribution ($27,750) plus the interest calculted on my contributions for the period they have been in my super fund. So, that means that the interest generated is $3,089. The released amount instead shows that the interest net of tax is $3,027, that means a tax of about 2% has been applied to it.

 

In case the second contribution was actually considered as a Non-Concessional one, then the gross interest would be $839, and the net interest would be $777. Thus having a tax of about 7.4%.

All of this make no sense to me. Why only 2% or 7.4% tax? And is it correct that I gained so much money?
I am very confused. In case this is not correct, it sounds like extra money has been taken from my Super account balance, on top of the $2,250 tax which I've already paid. Could you please clarify how the interest has been calculated? And what tax has been applied to the interest?

So, now I am confused about what is going to happen at tax time. I have contacted ATO and I have been told to declare $839 as the gain out of the FHSSS, which means that they have considered $30,000 as the sum of my contributions (without considering the $2,250 tax paid on the second amount). But, by doing this, I believe I will have a lower tax return compared to what I was previously expecting.

 

Can you please help me sort this out?

Thank you very much,
Ting

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Most helpful response

Devotee

Replies 1

Hi tingwu

 

Based on the numbers it appears that both amounts of $15,000 were treated as non-concessional contributions.

 

If the second contribution had been treated as a concessional contribution the releasable amount would have been $15,000 + $12,750 + associated earnings. About $28,500 in total.

 

So yes, not sure what's happened, why the information didn't get to the ATO advising that you'd be claiming a tax deduction for the second $15,000 contribution.

 

Not sure how to best fix this. One way would be to tell your fund you're no longer going to be claiming a tax deduction for the second contribution. You'll then get the $2,250 tax back into your super account. But then you wouldn't get the saving on your income tax as you'd planned to.

 

The other way is to contact the ATO and explain the situation. That the ATO has treated the August 2020 contribution as a non-concessional contribution. That it should have been treated as a concessional contribution. That now too much money has been taken out of the super account and is there anything that can be done to fix the situation.

 

I'm an ATO employee voluntarily providing my time here

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Most helpful response

Devotee

Replies 1

Hi tingwu

 

Based on the numbers it appears that both amounts of $15,000 were treated as non-concessional contributions.

 

If the second contribution had been treated as a concessional contribution the releasable amount would have been $15,000 + $12,750 + associated earnings. About $28,500 in total.

 

So yes, not sure what's happened, why the information didn't get to the ATO advising that you'd be claiming a tax deduction for the second $15,000 contribution.

 

Not sure how to best fix this. One way would be to tell your fund you're no longer going to be claiming a tax deduction for the second contribution. You'll then get the $2,250 tax back into your super account. But then you wouldn't get the saving on your income tax as you'd planned to.

 

The other way is to contact the ATO and explain the situation. That the ATO has treated the August 2020 contribution as a non-concessional contribution. That it should have been treated as a concessional contribution. That now too much money has been taken out of the super account and is there anything that can be done to fix the situation.

 

I'm an ATO employee voluntarily providing my time here

Devotee

Replies 0

As for the tax withheld on the released amount - this would have been calculated on the $839 of interest (associated earnings) included in the released amount.

 

The calculation is on someone's marginal tax rate, less a 30% tax offset. So a 7.4% withholding implies a marginal rate of 37.4%. Which isn't one of the marginal rates. Maybe the $839 pushes you over one of the income thresholds. I don't know the details of how the withholding calculation works in the ATO's systems.

 

I'm an ATO employee voluntarily providing my time here