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Re: Understanding tax benefits around the FHSS Scheme

Initiate

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Replies 9

Hi there,

 

My annual taxable earnings are $100,000. I want to make a personal concessional contribution of $15,000 in June 2020 (for the 2019/2020 FY) into my super fund and another personal concessional contribution of $15,000 in July 2020 (for the 2020/2021 FY), with the aim to draw back these funds under the FHSSS in September 2020.

 

Question 1: Will the making of each concessional contribution of $15,000 reduce my taxable income to $85,000 in both FY 2019-2020 and FY 2020-2021 (100,000-15,000)? Therefore reducing my tax payable from $24,497 (on $100,000) to $19,172 (on $85,000). Estimates derived from the ATO tax calculator.

 

Question 2: As I will be making the second concessional contribution of $15,000 and withdrawing the funds via the  FHSSS in the same FY (2020/2021), will I still be able to benefit from the reduction of taxable income (100,000 to 85,000) as outlined in question 1? I read the following statement on another post on this platform:

“You would not be eligible to claim a tax deduction after your funds have been released as you must confirm as part of your release application that you will not claim further tax deductions on the non-concessional contributions included in the determination.” I hope that this statement is only relevant to non-concessional contributions, whereas I’ll be undertaking concessional contributions.

 

Question 3: Can you confirm that upon release I will receive $30,000 less 15% ($4500 tax taken via super account), less 7% upon withdrawal (marginal tax rate of 37% – 30% = 7%, $1785): leaving a return of $23,715? I’m not considering any interest gains into my assessment as they will be very small as the funds will only be in the super account for 2-3 months.

 

Question 4: In summary, can you confirm my estimates are correct whereby, my tax saving over two financial years from the concessional payments amounts to ~$10,650 (($24,497- $19,172) x 2), less deductions by super and during withdrawal $6285 ($30,000 - $23,715), leaving an over all financial gain of $4365 ($10,650 - $6285). Have I overlooked anything here and if so what else do I need to consider?    

 

Many thanks,

 

Will

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Most helpful response

Community Moderator

Replies 7

Hi @wjhibberd

 

Thanks for your questions.

 

Big post! To make it easier, we will answer your questions one at a time.

 

1. Will the making of each concessional contribution of $15,000 reduce my taxable income to $85,000 in both financial years?

 

By claiming a $15,000 personal super contribution deduction in your 2020 tax return, your taxable income will be reduced by $15,000. So instead of paying tax and Medicare levy on $100,000, (assuming that there are no other deductions) you will be paying tax and Medicare levy on $85,000.

 

Claiming the same deduction in your 2021 tax return will also have the effect of reducing your taxable income. It is important to note that based on your scenario, your 2021 taxable income will be higher due to the assessable FHSS released amount that you will need to declare.

 

For more information about the assessable FHSS released amount and your tax return requirements, have a look at our website.

 

2. In 2021, will I still be able to benefit from the reduction of taxable income as outlined in question 1?

 

Yes, but you need to make sure that you have met the personal super contribution deduction rules and the FHSS scheme rules. We suggest that you check out the following thread for more information: claiming a tax deduction on contributions for FHSS

 

Based on your scenario, you will need to provide two notice of intents to your fund (one for each financial year). This requirement (as well as the fund acknowledgement) should be met before you request your FHSS determination and release. This will ensure that you can still claim your 2020 and 2021 personal super contribution deductions, despite your super fund no longer holding the contributions due to the FHSS release.

 

3. Can you confirm that upon release I will receive $30,000 less 15% ($4500 tax taken via super account), less 7% upon withdrawal?

 

Almost right, except you haven't factored in the Medicare levy. The first part of your calculation is correct, but it will be less 9% upon withdrawal. In turn, the correct calculation is $25,500 ($30,000 minus 15%) minus 9% (37% plus Medicare levy minus 30% offset) equals $23,205.

 

4. Can you confirm my estimates are correct?

 

Your estimates are just about right. Once again, you haven't factored in the Medicare levy. Overall, your total tax savings will be approximately $4,500 (ignoring associate earnings).

 

For more information about the first home super saver scheme, go to our website. We also suggest that you check out our guidance note (GN 2018/1) which can be accessed at the bottom of the page.

 

Good luck with your first home build or purchase.

 

Thanks, Chris

9 REPLIES 9

Devotee

Replies 0

@wjhibberd the information on this page explains that the deduction reduces your taxable income. 

https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/claiming-deductions-for-person...

I would say you can't claim the second deduction because if you apply in September 2020 you haven't done that years tax return. It's not done till 2021. Therefore it hasn't changed status from non-concessional to concessional.

Look at the information under "receiving your amount"

https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-sch...

Most helpful response

Community Moderator

Replies 7

Hi @wjhibberd

 

Thanks for your questions.

 

Big post! To make it easier, we will answer your questions one at a time.

 

1. Will the making of each concessional contribution of $15,000 reduce my taxable income to $85,000 in both financial years?

 

By claiming a $15,000 personal super contribution deduction in your 2020 tax return, your taxable income will be reduced by $15,000. So instead of paying tax and Medicare levy on $100,000, (assuming that there are no other deductions) you will be paying tax and Medicare levy on $85,000.

 

Claiming the same deduction in your 2021 tax return will also have the effect of reducing your taxable income. It is important to note that based on your scenario, your 2021 taxable income will be higher due to the assessable FHSS released amount that you will need to declare.

 

For more information about the assessable FHSS released amount and your tax return requirements, have a look at our website.

 

2. In 2021, will I still be able to benefit from the reduction of taxable income as outlined in question 1?

 

Yes, but you need to make sure that you have met the personal super contribution deduction rules and the FHSS scheme rules. We suggest that you check out the following thread for more information: claiming a tax deduction on contributions for FHSS

 

Based on your scenario, you will need to provide two notice of intents to your fund (one for each financial year). This requirement (as well as the fund acknowledgement) should be met before you request your FHSS determination and release. This will ensure that you can still claim your 2020 and 2021 personal super contribution deductions, despite your super fund no longer holding the contributions due to the FHSS release.

 

3. Can you confirm that upon release I will receive $30,000 less 15% ($4500 tax taken via super account), less 7% upon withdrawal?

 

Almost right, except you haven't factored in the Medicare levy. The first part of your calculation is correct, but it will be less 9% upon withdrawal. In turn, the correct calculation is $25,500 ($30,000 minus 15%) minus 9% (37% plus Medicare levy minus 30% offset) equals $23,205.

 

4. Can you confirm my estimates are correct?

 

Your estimates are just about right. Once again, you haven't factored in the Medicare levy. Overall, your total tax savings will be approximately $4,500 (ignoring associate earnings).

 

For more information about the first home super saver scheme, go to our website. We also suggest that you check out our guidance note (GN 2018/1) which can be accessed at the bottom of the page.

 

Good luck with your first home build or purchase.

 

Thanks, Chris

Newbie

Replies 6

Hello, 

 

I have a similar question. 

I have deposited 15k into my super recently from my savings. 
I have done a determination listing the 15k of after tax contributions but not listing any declarations. 
I will sign a contract for a house tomorrow and likely request the withdrawal of the funds in super under the FHSS to go towards deposit a few days after signing (before end of tax year) 

My question is:

 

1. Can I still take advantage of the tax offset when I do a tax return even if the funds are not in my super anymore?

 

2. If yes, do I need to put anything in the 'declerations' field in the the FHSS Determination? or is this something that can be done at a later days once we do tax return? 

thanks. 

ATO Community Support

Replies 5

Hi @Ben6

 

You'll still be entitled to the offset we give when we release your funds - that's the whole point of the offset! You receive this offset whether your contributions released are concessional or non-concessional.

 

You don't need to put anything extra in your release request. We do all the hard work there. You'll get a payment summary stating the amounts, and it will pre-fill in your tax return for you.

 

You can read about applying to release your FHSS on our website.

Newbie

Replies 0

Thanks Blake! 
So it doesn't matter if I fill in the 'deductions' part of the determination?

And doesn't matter if I don't fill in the intent to claim form for my super? 

Newbie

Replies 3

Hi Blake, thanks for your reply. 

So just to confirm, I:

- have deposited 15k from my savings into super. 

- have submitted a determination listing 15k contributions and no deductions. 
- have not submitted a notice of intent to claim to anyone. 

- have signed a contract to purchase. 

if I now request a release, get the money and put it towards the house deposit. 
Then around early August I do my tax return and although the money is no longer in my super or my possession I will still receive a tax discount?

 

Sorry to check again but I've been told a few different things so just want to be sure but your explanation definitely makes the most sense. 

thanks, Ben. 

P.S sorry didn't think my initial reply above actually posted but just noticed now it did. 

ATO Community Support

Replies 2

Hi @Ben6,

 

When we responded to your previous question we didn't realise you were talking about deductions. There is a tax offset with your FHSS which is what @BlakeATO was referring to. For a super deduction you would need to lodge a notice of intent with your fund, prior to requesting the release of your FHSS savings. You will not be able to do this if you have already signed a contract. Once the contract is signed you have up to 14 days to request a release of your FHSS savings and you cannot request a new determination. The last determination you sent us is what would be used once you send the release request through.

 

You would've had to lodge the intent to claim the super deduction prior to signing the contract and have the fund acknowledge this. Thereafter you would need to request a new determination from us. Your fund would show the non concessional contributions as concessional contributions (as a 15% tax is applied),  thereafter you can only claim 85% of the amount you originally contributed (plus earnings). 

 

As this did not occur prior to signing the contract you cannot claim a super deduction. However you will still be able to utilise the FHSS 30% tax offset on your return.  Please ensure your FHSS release is done within 14days of signing the contract.

 

All the best.

 

 

Newbie

Replies 1

Hi Jodie, thanks for your reply. 

So if I've already paid 32.5% tax on the money when I earnt it and it went into my account, then deposited it into my super,  does it get taxed when I release it form my super under the FHSS and the 30% tax offset brings the tax to 2.5%?

Or it doesn't get taxed and the 30% tax offset means I get all but 2.5% of the tax paid on that cash refunded essentially? 

 

ATO Community Support

Replies 0

Hi @Ben6,

 

We have posted a response on our forum previously, regarding how tax is applied under FHSS scheme.

 

Please use the link for further information.

 

All the best.