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FHSS - withdraw limits, legislation changes etc

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Hi,

I have a few questions.

 

1. Do the limits on the contributions release apply before any calculations are made (I.E Tax).

For example, lets say contribute over 3 years:

*year 1 - $17,500 concessional (taxed at 15% in fund down to 15k)

*year 2 - $10,000 concessional (taxed at 15% in fund down to 8,5k)

*year 3 - $10,000 concessional (taxed at 15% in fund down to 8,5k)

When I got to withdraw, I can only withdraw 85% of my concessional contributions... but the limit is 30k. So is it either:

A) 30k of concessional contributions in total yielding $25,500.

or B) 37.5k of concessional contributions in total yielding $31,875 (85%) but then capped at the 30k limit.

 

2. Tax is also applied on the concessional amounts withdrawn, marginal rate - 30%. I'm guessing that, above, A is the correct answer and the tax is then applied on the $25,500 reducing the total amount released again.

 

3. In regards to associated earnings, how is the SIC applied to calculated the associated earnings? I'm assuming the total amount contributed up to the limit of 30k is compounded daily with the daily SIC rate.

3a. Lets say I contribute 10k in year one, in bulk, as concessional. While I can only withdraw 85% later, is the SIC is still applied to the 10K?

3b. Lets say the SIC is a constant 5% annual. Assuming the above answer is yes, by year 2 the value of the "total investment" would be $10,500 and I contribute another $10k concessional bringing it up to $20,500. In year 3, with the 5% annual SIC, would the "total investment" compound up to $21,525?

3c. If yes, would that be a $20k concessional contributions assessed come release time with $1,525 associated earnings?

 

4. If government legislation changes, is it likely that we'd be able to preserve our home investment (including the associated earnings) in some way as opposed to, for example, it becoming trapped in super until we retire? 

I don't think I'll get an absolute answer for this one which is fine Smiley Happy

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Hi @CovertOwl,

 

Thanks for posting.

 

You’ve raised a number of questions so we’ve split our response into sections.

 

Working our your maximum release amount

 

When you request an FHSS scheme determination, we’ll work out the maximum amount you can withdraw – your maximum release amount.

 

Your maximum release amount is calculated using:

  • 100% of your eligible non-concessional contributions
  • 85% of your eligible concessional contributions, and
  • your associated earnings on both the eligible concessional and non-concessional contributions.

 

Only 85% of your concessional contributions are included because these contributions are subject to a concessional tax rate of 15% in your super fund.

 

It’s worth keeping in mind that only up to a maximum of $15,000 of eligible contributions can be withdrawn from any one year, even if you contribute more than $15,000.

 

So using your example, your maximum release amount would be $25,500 (plus associated earnings) and would include the following amounts from each year:

  • Year 1 - $12,750 (85% of $15,000 eligible concessional contributions)
  • Year 2 - $8,500 (85% of $10,000 eligible concessional contributions)
  • Year 3 - $4,250 (85% of $5,000 eligible concessional contributions)

 

Only $5,000 of the $10,000 contributed in year 3 is eligible – this is because there is a total limit of $30,000 of eligible contributions that can be released across all years.

 

You can find more information on calculating maximum release amount in LCR 2018/5, paragraphs 18 and 21 and GN 2018/1.

 

Tax on released amount

 

Your assessable FHSS released amount will be subject to a withholding tax. Your assessable FHSS released amount is your eligible concessional contributions plus your associated earnings.

 

When working out the tax that is withheld from your assessable FHSS released amounts, we’ll firstly estimate your marginal tax rate for the financial year. Generally, this is based on your taxable income from a recently lodged tax return (generally within the last two years) plus your assessable FHSS released amount. At the time you lodge your FHSS release request, if the estimated marginal tax rate isn't correct, you can change this rate to reflect the correct rate.

 

Once we’ve estimated your marginal tax rate, we’ll reduce this rate by the 30% tax offset.

 

So for example, if your estimated marginal tax rate is 39% (37% plus 2% Medicare levy), we’ll reduce this rate by 30% - a rate of 9% would be withheld from your assessable FHSS released amount.

 

Associated earnings

 

Your associated earnings are calculated using a specified rate. Your associated earnings amount is calculated based on your voluntary contributions and when they were credited to your super fund account.

 

For concessional contributions, the associated earnings are calculated on the contribution amount after tax has been deducted by the super fund – you can find more information on this in the Explanatory memorandum, paragraph 1.139.

 

If you made contributions towards the FHSS scheme between 1 July 2017 and 30 June 2018, we calculate the earnings on these contributions from 1 July 2017 until the day of your determination request.

 

If you’ve made contributions from 1 July 2018 onwards, we calculate the earnings from the 1st day of the month in which you made the contribution, until the day of your determination.

 

We calculate your associated earnings up until the day you request a FHSS determination – so every time you lodge a determination request, the associated earnings will be recalculated.

 

Changes to FHSS legislation

 

Any changes to FHSS scheme legislation is the responsibility of the Parliament of Australia. We administer any changes once they have passed both houses of the parliament and received Royal Assent to become law.

 

If you have any feedback on the legislation you can contact your local member of parliament or the Department of Treasury – find their details on the Australian Government website.

 

Thanks, NicM.

 

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Hi @CovertOwl,

 

Thanks for posting.

 

You’ve raised a number of questions so we’ve split our response into sections.

 

Working our your maximum release amount

 

When you request an FHSS scheme determination, we’ll work out the maximum amount you can withdraw – your maximum release amount.

 

Your maximum release amount is calculated using:

  • 100% of your eligible non-concessional contributions
  • 85% of your eligible concessional contributions, and
  • your associated earnings on both the eligible concessional and non-concessional contributions.

 

Only 85% of your concessional contributions are included because these contributions are subject to a concessional tax rate of 15% in your super fund.

 

It’s worth keeping in mind that only up to a maximum of $15,000 of eligible contributions can be withdrawn from any one year, even if you contribute more than $15,000.

 

So using your example, your maximum release amount would be $25,500 (plus associated earnings) and would include the following amounts from each year:

  • Year 1 - $12,750 (85% of $15,000 eligible concessional contributions)
  • Year 2 - $8,500 (85% of $10,000 eligible concessional contributions)
  • Year 3 - $4,250 (85% of $5,000 eligible concessional contributions)

 

Only $5,000 of the $10,000 contributed in year 3 is eligible – this is because there is a total limit of $30,000 of eligible contributions that can be released across all years.

 

You can find more information on calculating maximum release amount in LCR 2018/5, paragraphs 18 and 21 and GN 2018/1.

 

Tax on released amount

 

Your assessable FHSS released amount will be subject to a withholding tax. Your assessable FHSS released amount is your eligible concessional contributions plus your associated earnings.

 

When working out the tax that is withheld from your assessable FHSS released amounts, we’ll firstly estimate your marginal tax rate for the financial year. Generally, this is based on your taxable income from a recently lodged tax return (generally within the last two years) plus your assessable FHSS released amount. At the time you lodge your FHSS release request, if the estimated marginal tax rate isn't correct, you can change this rate to reflect the correct rate.

 

Once we’ve estimated your marginal tax rate, we’ll reduce this rate by the 30% tax offset.

 

So for example, if your estimated marginal tax rate is 39% (37% plus 2% Medicare levy), we’ll reduce this rate by 30% - a rate of 9% would be withheld from your assessable FHSS released amount.

 

Associated earnings

 

Your associated earnings are calculated using a specified rate. Your associated earnings amount is calculated based on your voluntary contributions and when they were credited to your super fund account.

 

For concessional contributions, the associated earnings are calculated on the contribution amount after tax has been deducted by the super fund – you can find more information on this in the Explanatory memorandum, paragraph 1.139.

 

If you made contributions towards the FHSS scheme between 1 July 2017 and 30 June 2018, we calculate the earnings on these contributions from 1 July 2017 until the day of your determination request.

 

If you’ve made contributions from 1 July 2018 onwards, we calculate the earnings from the 1st day of the month in which you made the contribution, until the day of your determination.

 

We calculate your associated earnings up until the day you request a FHSS determination – so every time you lodge a determination request, the associated earnings will be recalculated.

 

Changes to FHSS legislation

 

Any changes to FHSS scheme legislation is the responsibility of the Parliament of Australia. We administer any changes once they have passed both houses of the parliament and received Royal Assent to become law.

 

If you have any feedback on the legislation you can contact your local member of parliament or the Department of Treasury – find their details on the Australian Government website.

 

Thanks, NicM.