FHSS Scheme I Must Be an Thick Cause I Don't Full Understand

• 

  Drakesy on 07/12/2023 - 19:06

  See here

  • 

    Kramo on 07/12/2023 - 19:33

    +1

    It's not a 30% "of your rate" discount. It's a 30 percentage point discount. So OP is right on their calculations of what rate it'll be (9% on the remaining).

    https://community.ato.gov.au/s/question/a0J9s0000001FHw/p000…

    @postform - Count the FHSS withdrawal as assessable income in the year you withdraw to work out your rate, whether that's 32.5% or 37% etc.

    • 

      postform on 07/12/2023 - 20:29

      But I also heard the FY you withdraw, it assess that as income don't they? And so it ends up pushing your tax rate up?

      • 

        Kramo on 07/12/2023 - 21:17

        If you're within $50k (or whatever you withdraw) of the next tax bracket, then yeah, it'll partially count as that next tax bracket up (less the 30pp discount).

        • 

          postform on 07/12/2023 - 23:17

          +2

          @Kramo: Wait so say I'm at 180k and I do 30k

          And next FY which is FY2024 I withdraw whatever is remaining. 30*0.85 which is 25.5k. it will push up my salary to 200k for FY 2024, meaning now instead of 37.5 less it is now 47 - 30.. which is 17…

          Essentially you end up saving very little if you creep from 2nd highest to the highest tax bracket? 🥵

          • 

            Drakesy on 08/12/2023 - 00:42

            @postform: Now that you've mentioned it its looking worse by the hour, taxman double dipping almost

          • 

            samyall on 08/12/2023 - 08:30

            @postform: Surely the can't tax the whole amount at the top rate?

            They probably withhold at the top rate but will refund the rest when you do your tax return otherwise it would be double dipping as Drakesy says.

            • 

              postform on 08/12/2023 - 09:51

              @samyall: It don't for the release amount, it's taxed differently but they calculate which bracket you are in for that FY by adding salary and withdrawn amount. In my example 200k+, which means they will use the highest tax bracket 45+2 = 47.. which means that is the bracket they use to calculate your offset which again 30 offsets leaving you with 17%. All in all the amount released is taxed 15% initially and then 17% when released.

              And that's not including the other tax you pay for any earnings on the amount. I am unsure how they tax that. Probably at your tax rate 🤣

• 

  brendanm on 07/12/2023 - 19:07

  Use some of your >$120k salary to pay an accountant to explain it to you.

• 

  Agret on 08/12/2023 - 01:40

  +3

  I asked Bing to explain it, here's what I got

  The Australian First Home Super Saver (FHSS) Scheme is a program designed to help people save for their first home. Here's how it works in simple terms:

  1. You can make voluntary contributions to your superannuation fund, which is like a retirement savings account. These contributions can be made before tax (concessional) or after tax (non-concessional)¹.
  2. The money you contribute enjoys a favorable tax treatment, which means you pay less tax on this money compared to your regular income⁴.
  3. You can contribute up to $15,000 per financial year, and up to a total of $50,000 across all years¹.
  4. When you're ready to buy your first home, you can apply to have these contributions (and the earnings on them) released¹.
  5. The money you withdraw can be used to buy a new or existing home in Australia¹.

  Remember, you need to apply for and receive a FHSS determination from the Australian Taxation Office before signing a contract for your first home or applying for release of your FHSS amounts¹. It's a great way to save for a home while also saving on tax!

  Source: Conversation with Bing, 08/12/2023
  (1) First home super saver scheme | Australian Taxation Office. https://www.ato.gov.au/Individuals/Super/Withdrawing-and-usi….
  (2) First Home Super Saver (FHSS) Scheme – Updated 2022. https://www.realestate.com.au/home-loans/guides/understandin….
  (3) How the First Home Super Saver Scheme (FHSSS) works - SuperGuide. https://www.superguide.com.au/how-super-works/first-home-sup….
  (4) First Home Super Saver Scheme - Treasury. https://treasury.gov.au/sites/default/files/2022-03/first-ho….
  (5) First Home Super Saver Scheme | FHSS | ART - Australian Retirement Trust. https://www.australianretirementtrust.com.au/superannuation/….

  When you're ready to withdraw your FHSS scheme contributions, you will need to request a FHSS determination and release². The Australian Taxation Office (ATO) will calculate your maximum FHSS release amount, which includes 100% of your eligible non-concessional contributions and 85% of your eligible concessional contributions, plus associated earnings².

  The tax payable on your money released under the FHSS is based on your marginal tax rate less a 30% offset⁴. This means that the amount you withdraw will be taxed at your income tax rate, but you get a 30% discount on this tax².

  Here's an example to illustrate this:

  Let's say your marginal tax rate is 37% and you have Medicare levy of 2%. So, your total tax rate would be 39%. If you withdraw $15,000 from your FHSS scheme, the tax you would pay is calculated as follows:

  1. Calculate the tax without the offset: $15,000 * 39% = $5,850
  2. Apply the 30% offset: $5,850 * 30% = $1,755
  3. Subtract the offset from the initial tax: $5,850 - $1,755 = $4,095

  So, you would pay $4,095 in tax and receive $10,905 ($15,000 - $4,095) from your FHSS scheme².

  Please note that this is a simplified example and actual calculations may vary based on your individual circumstances. It's always a good idea to consult with a tax professional or financial advisor for personalized advice.

  Source: Conversation with Bing, 08/12/2023
  (1) FHSS tax calculation on withdrawal | ATO Community. https://community.ato.gov.au/s/question/a0J9s0000001FEL/p000….
  (2) The First Home Super Saver scheme can boost your deposit. Here's how to …. https://www.abc.net.au/everyday/how-the-first-home-super-sav….
  (3) First home super saver scheme | Australian Taxation Office. https://www.ato.gov.au/Individuals/Super/Withdrawing-and-usi….
  (4) What you must know about the First Home Super Saver Scheme. https://www.bdo.com.au/en-au/insights/private-wealth/everyth….

  • 

    avoidfullprice on 09/12/2023 - 08:51

    The bing example is applicable if OP put in $15k after tax / non concessional contribution.

    Because OP is putting in super via salary sacrifice, that calculation doesn’t hold like blueyez down below mentioned

• 

  blueyez on 08/12/2023 - 21:25

  You're technically withdrawing 85% of the contribution you've put into super, as the 15% goes straight to the ATO. Instead of income tax it will be less 30% tax offset on your regular income tax on the amount withdrawn.

  My brain is too tired to crunch numbers more precisely.

• 

  avoidfullprice on 09/12/2023 - 09:10

  Effectively (let's remove any interest earned because it complicates it) you are taxed 15% .. and then 9% on the remaining after 15% so effectively abit over 24% probably 25 or something.

  About 15% + 7.65% = 22.65% of the 15k in tax if you are on 37% tax bracket when you withdraw

  Example: When you sal sac $15k, $2.25k (15% of $15k) gone to ato leaving you $12.75k. You then withdraw them for FHSS. You pay extra 9% tax + levy on that $12.75k, which is $1.15k. So technically is 7.65% of the $15k in withdrawal tax.

  Secondly, you will be withdrawing a bit more than $12.75k due to the deeming interest rate component (ie simplified profits on your super contributions). It is explained on the ato website better than i do.

  Essentially you end up saving very little if you creep from 2nd highest to the highest tax bracket? 🥵

  That depends if stage 3 tax cut kicks in and if you will earn under $200k

  • 

    postform on 13/01/2024 - 10:46

    Hey mate I think I'll be under $200k however! I heard that the FHSS adds to your taxable income for that FY only to figure out which tax bracket to tax the FHSS amount. Say I earn 180k and I withdraw 25k from the FHSS. Then! I'll be at 205k for the purpose of calculating which bracket to do the FFHS tax which is 47.5%. Meaning again 15%+17.5% (as a basic simple calculation)

    Am I right to say that this scheme does punish you a bit ? If it wasn't for the FHSS adding to your assessible income for that released FY, this scheme actually would save you a bit.