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Tax on FHSS

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Hi, Just wanted to check if I am understanding the tax rates around the FHSS.

If my marginal rate is 37% and i decide I want to put $10000 into my super under the FHSS.

Using the FHSS I would make a consenional contribution to super that would be taxed at 15% leaving me $8500 in my super account.

When I withdraw the $8500 to purchase a house it would be taxed again at 25.9% (37% less 30% discount).  So $8500 * .259 = $2201.50 tax. Which leaves $6298.50.  Is this correct?

Thanks

Jeremy

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Hi @jez85,

 

Thanks for your patience whilst we received a specialist response in regards to your query. 

 

Based on your example, a concessional contribution of $10,000 would be taxed at 15% within your superannuation fund. You are correct that this would leave you with $8,500 in your super account.

 

When you withdraw the $8,500, under the FHSS scheme, the withholding rate would be 9% (39% less the 30% offset). So $8,500 less 9% withholding tax would leave you with $7,735. This is more than the $6,300 you calculated if you did not use the FHSS Scheme. Note this calculation does not take into account the associated earnings on the contributions which would also be withdrawn under the FHSS scheme. The withholding rate would also be applied to the associated earnings.

 

The above calculation assumes you remain in the same 37% tax bracket and the Medicare levy of 2% remains the same in the year you request the withdrawal. In summary the withholding rate will be calculated as follows:

  1. Your taxable income from the last year plus your assessable FHSS released amount. This equals your estimated income for the year you request withdrawal. Then,
  2. Calculate the tax rate based on this estimated income.
  3. Then add the Medicare levy to this tax rate.
  4. Then reduce this figure by the 30% offset.
  5. This will be your withholding rate that will be applied to the assessable FHSS released amount for the year you request withdrawal.

If you have further questions regarding the FHSS, you can phone us on 13 10 20 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks, JodieH.

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Megastar

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hi @jez85

 

We've sent this on internally for clarification and we'll be back in touch with a response as soon as we can.

 

Thanks, Michael.

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Hi MichaelP Have you had any update on this? Thanks

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@MichaelPwrote:

hi @jez85

 

We've sent this on internally for clarification and we'll be back in touch with a response as soon as we can.

 

Thanks, Michael.


It has been over 2 months @MichaelP what is the answer??

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Hi @jez85,

 

Thanks for your patience whilst we received a specialist response in regards to your query. 

 

Based on your example, a concessional contribution of $10,000 would be taxed at 15% within your superannuation fund. You are correct that this would leave you with $8,500 in your super account.

 

When you withdraw the $8,500, under the FHSS scheme, the withholding rate would be 9% (39% less the 30% offset). So $8,500 less 9% withholding tax would leave you with $7,735. This is more than the $6,300 you calculated if you did not use the FHSS Scheme. Note this calculation does not take into account the associated earnings on the contributions which would also be withdrawn under the FHSS scheme. The withholding rate would also be applied to the associated earnings.

 

The above calculation assumes you remain in the same 37% tax bracket and the Medicare levy of 2% remains the same in the year you request the withdrawal. In summary the withholding rate will be calculated as follows:

  1. Your taxable income from the last year plus your assessable FHSS released amount. This equals your estimated income for the year you request withdrawal. Then,
  2. Calculate the tax rate based on this estimated income.
  3. Then add the Medicare levy to this tax rate.
  4. Then reduce this figure by the 30% offset.
  5. This will be your withholding rate that will be applied to the assessable FHSS released amount for the year you request withdrawal.

If you have further questions regarding the FHSS, you can phone us on 13 10 20 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks, JodieH.

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I think the process is clear but it doesn't apply to the example used in Budget Plan?

 

Michelle earns $60,000 a year and wants to buy her first home. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account, increasing her balance by $8,500 after the contributions tax has been paid by her fund. After three years, she is able to withdraw $27,380 of contributions and deemed earnings on those contributions. Her withdrawal is taxed at her marginal rate (including Medicare levy) less a 30 per cent offset. After paying $1,620 of withdrawal tax she has $25,760 that she can use for her deposit. 

 

 

Saying 60000+27380=87,380 

 

So 380 is above 87000 subject to (39%-30%=9%) = 34.2

27000 is below 87000 subjec to 34.5-30=4.5% tax =27000*0.045=1215

 

How can the example get a tax of 1620?

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Hi @baron33,

 

Thanks for getting in touch - as the example provided in a previous post:

 

Michelle earns $60,000, but salary sacrifices $10,000, leaving $50,000 as her taxable income for the year. She withdraws $27,380 from her super, which is included in her taxable income, taking her total taxable income to $77,380 for the year. Based on current marginal rates, her personal income tax on $77,380 is $16,695.The Medicare Levy on that amount, in that year (bearing in mind she has saved for three years so the rate will be 2.5%) is $1,934. Total tax is $18,629. She gets an offset of 30% of the withdrawal amount ($8,214), bringing her tax bill down to $10,415.

 

If Michelle didn't  withdraw the amount in that year, her taxable income would be $50,000. She would pay personal income tax of $7,797, Medicare Levy of $1,250, there would be no FHSSS withdrawal offset, she would receive a low-income tax offset of $250, leaving her with a total tax bill $8,797.

 

The difference between these two numbers is the amount of tax Michelle is paying on the FHSSS withdrawal: $1,618.

 

You can phone us on 13 10 20 between 8am - 6pm, Monday to Friday to discuss further with an operator.

 

Thanks, JodieH.

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Replies 5

Hi Jodie, could you please confirm that the details you have provided are correct, and the tax rate applied to the assessable amount that is withdrawn is Marginal Tax Rate - 30% points. (Ie in your example you said the marginal rate is 39%, so therefore the rate which the widthdrawn money would be taxed at is 9%)

 

This is is a very big difference compared to only receiving a 30% discount on that money (ie a 26% tax rate based on your example instead of 9%)

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Hi 

 

I'm pretty it is margin rate - 30% (e.g. 32.5%-30%=2.5%) otherwist there is no point to do this...as you lose money

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I agree that’s how it SHOULD be applied, but on anot her thread, the Amanda from the ATO has informed:

 

“The released amounts will be taxed at your marginal rate minus a 30% offset (ie tax rate of 32.5% less 30% leads to a 22.75% tax rate)”

 

Very different.

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