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First Home Super Saver Scheme

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Hello.

 

Could you please provide an example on the difference between FHSSS and standard savings, and the tax saving, and how this is all calculated?

 

If I had an annual income of $50,000, with $10,000 per annum contribution to super for 3 years. 

 

Thanks,

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Community Moderator

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** We have updated some of the calculations in our response **

 

Hi @Georgia_jennie

 

Thanks for your post.

 

The FHSS scheme allows you to save money for your first home inside your super fund by taking advantage of super's higher rate of earnings and concessional tax treatment.

 

For more information about the first home super saver scheme, you can check out our website.

 

The following example attempts to demonstrate how much you can save based on how the tax is calculated. It assumes that your annual income is $50,000 in each of the years you make your $10,000 voluntary contributions as well as the year you submit your FHSS release request. Your resident tax rate would be 32.5%.

 

It also assumes that you intend to claim a tax deduction for your voluntary contributions. For more information about claiming deductions for personal super contributions, refer to our website.

 

  1. Total tax withheld by your super fund after receiving notice of intents: $4,500 ($30,000 x 15%)
  2. Total tax payable on assessable FHSS released amount (excluding associated earnings): $1,147.50 ($25,500 x 32.5% plus Medicare levy minus 30% offset)
  3. Total tax credits due to personal contribution deductions: $10,350 ($30,000 x 32.5% plus Medicare levy)
  4. Total amount saved: $34,702.50 ($30,000 minus $4,500 (1) minus $1,147.50 (2) plus $10,350 (3))

 

As you can see, by claiming tax deductions for your three $10,000 voluntary contributions, through a combination of tax withheld and tax refunded you have gained an additional $4,702.50. You wouldn't be able to do this via a savings account.

 

The associated earnings are calculated in accordance with the shortfall interest charge (SIC) rates which you can look at on our website. You will notice that they are considerably higher than a standard savings account interest rate.

 

Working out how much more you will earn by saving for your first home using your super fund instead of your savings account is more difficult to demonstrate. If you compare your savings account interest rate with our SIC rates, you should be able to work out an approximate saving.

 

It is also important to note that your associate earnings will be taxed at 4.5% (32.5% plus Medicare levy minus 30% offset) while your savings account interest will be taxed at 34.5% (32.5% plus Medicare levy).

 

Hope this helps.

 

Thanks, ChrisR

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Most helpful response

ATO Certified Response

Community Moderator

Replies 2

** We have updated some of the calculations in our response **

 

Hi @Georgia_jennie

 

Thanks for your post.

 

The FHSS scheme allows you to save money for your first home inside your super fund by taking advantage of super's higher rate of earnings and concessional tax treatment.

 

For more information about the first home super saver scheme, you can check out our website.

 

The following example attempts to demonstrate how much you can save based on how the tax is calculated. It assumes that your annual income is $50,000 in each of the years you make your $10,000 voluntary contributions as well as the year you submit your FHSS release request. Your resident tax rate would be 32.5%.

 

It also assumes that you intend to claim a tax deduction for your voluntary contributions. For more information about claiming deductions for personal super contributions, refer to our website.

 

  1. Total tax withheld by your super fund after receiving notice of intents: $4,500 ($30,000 x 15%)
  2. Total tax payable on assessable FHSS released amount (excluding associated earnings): $1,147.50 ($25,500 x 32.5% plus Medicare levy minus 30% offset)
  3. Total tax credits due to personal contribution deductions: $10,350 ($30,000 x 32.5% plus Medicare levy)
  4. Total amount saved: $34,702.50 ($30,000 minus $4,500 (1) minus $1,147.50 (2) plus $10,350 (3))

 

As you can see, by claiming tax deductions for your three $10,000 voluntary contributions, through a combination of tax withheld and tax refunded you have gained an additional $4,702.50. You wouldn't be able to do this via a savings account.

 

The associated earnings are calculated in accordance with the shortfall interest charge (SIC) rates which you can look at on our website. You will notice that they are considerably higher than a standard savings account interest rate.

 

Working out how much more you will earn by saving for your first home using your super fund instead of your savings account is more difficult to demonstrate. If you compare your savings account interest rate with our SIC rates, you should be able to work out an approximate saving.

 

It is also important to note that your associate earnings will be taxed at 4.5% (32.5% plus Medicare levy minus 30% offset) while your savings account interest will be taxed at 34.5% (32.5% plus Medicare levy).

 

Hope this helps.

 

Thanks, ChrisR

Newbie

Replies 0

Hi Chris,

 

Thanks for providing this example for us. I just had a question on your calculations in step 2 however. Would the tax payable not be $1,147 and not the $1,350 that you have? This is calculated as: 

$30,000 less $4,500 withholding tax from super fund (at 15%) equals $25,500. This amount is then taxed at 4.5% (32.5% + 2% - 30%) on withdrawal which is $1,147?

 

I would have thought that taxing us on the $30,000 (which has already been taxed at 15%), instead of $25,500, is causing double taxation on that $4,500 difference?

 

Cheers.

Community Moderator

Replies 0

Hi @mwilsonw

 

Thanks for joining the conversation.

 

You are correct. The tax should be $1,147.50 ($25,500 x 32.5% plus Medicare levy minus 30% offset) as the assessable FHSS released amount doesn't include the 15% tax that has been withheld by the super fund.

 

We have updated our previous response accordingly.

 

Hope this helps.