FHSS Lump After tax contributions

Mrgreenz on 23/05/2020 - 10:14

Hi,

I would like to pick the brains of anyone versed in the FHSS and anyone who has used it.

  • I am almost certainly going to buy a house within the next 24 months.

  • I currently have $0 voulantarly contributed in my super

  • I earn in the 37% tax bracket

I believe the following will yeild around $2k in tax savings:

  1. Deposit 13k (to avoid breaking the 25k annual limit) of my savings (after tax money) into my super account before june 30

  2. Notify my super account that I plan to claim a tax deduction on the amount (13k)

  3. Pay 15% tax on ingoing funds = 1,950

4 11,050 into super.

  1. Come tax time - my taxable income is reduced by 13k giving

13,000 × 0.39 (37 bracket + 2% medicare) reduction in tax = $5,070

  1. Withdraw monies for deposit =11,050 - 9% tax (marginal rate - 30% offset = $10,055

  2. Add tax savings = 10,055 + 5070 =

$15,125 for deposit

Pros:
More deposit

Cons:
Dealing with paperwork
Cash exposed to equity markets (pro or con)

Thanks in advance for any info

Financial

Comments

  • whooah1979 on 23/05/2020 - 10:26

    Draw $10k from super now and $10k after next month for the deposit.

    • Mrgreenz on 23/05/2020 - 11:06

      Fortunately I don't meet the criteria to be eligible to withdraw

  • heysi on 23/05/2020 - 11:26

    Your super fund may allow you to choose how the contributions are invested, as cash instead of equities for example. They may also charge a fee for withdrawals.

    The withdrawal amount also includes earnings calculated at the 90-day Bank Bill rate plus three percentage points, currently 3.89% PA.

    There's another FHSS thread here: https://www.ozbargain.com.au/node/509723

  • suchcha on 23/05/2020 - 13:52
    +1

    You might be able to contribute the full 15k annual limit because you can carry forward unused portions of the 25k from last year..

  • Mrgreenz on 24/05/2020 - 22:55

    I've come across this article in my research:

    https://firststatesuper.com.au/blog/you-can-now-get-a-deduct…

    Effectively, the results of salary sacrificing into super is achivable by all payg employees; by way of after tax contribution and subsequent intent to claim taxdeduction.

    I for one didn't realise this, and I imagine few do.

    Note: providing the info in the article is correct, which I belive it is.

  • blueyez on 25/05/2020 - 10:03
    +1

    After making an after tax contribution you can submit a form 290 (ATO form) to claim the tax deduction. Ensure you do this in the same or next financial year after making the contribution - but before lodging your tax return.

    There was recent legislation passed where you can carryover your cap from last financial year if you didn't use the full amount in the 18/19 FY. Also keep in mind this includes contributions your employer has put in that counts towards the cap.

    https://www.ato.gov.au/Rates/Key-superannuation-rates-and-th…

    Unused concessional cap carry forward

    From 1 July 2018 if you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts.

    The first year you will be entitled to carry forward unused amounts is the 2019–20 financial year. Unused amounts are available for a maximum of five years, and after this period will expire.

    Hope this helps - it might be better to run this past a financial advisor to get specific advice =) But generally speaking I do think it's a good tax saving / deposit boost (looking to do this myself in the future)

    • Mrgreenz on 25/05/2020 - 20:42

      Thanks for the info, I have looked into this and it looks beneficial for some.

      However the $15,000/FY still applies for the FHSS, and so any contributions exceeding the 15k limit would be ineligible for withdrawal under the scheme.

      • blueyez on 25/05/2020 - 21:29

        Woops forgot about the scheme side of things, yes you're correct, $15k max each FY for FHSSS with a max of $30k across all financial years

        My brain was stuck in normal caps lol

        But you could still put more than 13k assuming you didn't max out your 25k cap last FY =) if you wanted to reach the 15k

        • Mrgreenz on 26/05/2020 - 09:40

          Ah, true, that would mean full utilization within 2 years. I supose it would just be a case of sticking the figures in come tax time? Or would there be a seperate form to make use of the carry over?

          • blueyez on 27/05/2020 - 12:37

            @Mrgreenz: I don't think it would be separate - the ATO should know their own rules lol

            As far as i can tell you just need to enter each contribution amount you made individually =)

            Make sure each contribution is eligible, we will check if it matches contributions reported to us by your super fund. You may be required to provide evidence of your contributions prior to us releasing your FHSS amounts to you.

  • JIMB0 on 25/05/2020 - 12:26

    What happens if you make a contribution but don't end up using the scheme? Can you claim your money back and pay the tax on it that you would have paid anyway?

    • Mrgreenz on 25/05/2020 - 14:11

      You can re-conibute the money to your super (if you withdrew it with intent to buy, but didnt buy). Or you can keep the money and pay a 20% tax on the withdrawn money

  • hamole on 25/05/2020 - 20:23

    I have done pretty much exactly this and recently withdrawn the money. There's honestly not much paperwork involved and getting the money released via MyGov was very easy.

    Your numbers look right.

    • Mrgreenz on 25/05/2020 - 20:45

      Thanks for the first hand info. Hope you find a place!

  • Gelato on 25/05/2020 - 22:26

    Side question and I’ve been curious… what if money gone into super goes south like what happened in end of March when stock market crashed?

    • hamole on 25/05/2020 - 22:29

      Your release amount is
      "100% of eligible non-concessional contributions
      85% of eligible concessional contributions
      associated earnings calculated on these contributions using a deemed rate of return – this is based on the 90-day Bank Bill rate plus three percentage points (shortfall interest charge rate)."

      So as long as you actually have that much left in your super you should still get the same amount

      • Gelato on 25/05/2020 - 22:32

        Cool thanks that’s good to know.

      • Gelato on 25/05/2020 - 23:16

        Actually the deemed rate of return: 90 day BBSW + 3% is better than the interest rate in saving account (generally speaking)!

        I guess when this scheme came out in 2018? The saving account interest rate was around 3%

    • blueyez on 27/05/2020 - 12:40

      Should be as per this info, from what i can tell on the main page for the scheme;

      Main page- https://www.ato.gov.au/individuals/super/withdrawing-and-usi…

      Maximum release amount

      The FHSS maximum release amount is the sum of your eligible contributions, taking into account the yearly and total limits, and associated earnings. This amount includes:

      100% of eligible non-concessional contributions
85% of eligible concessional contributions
associated earnings calculated on these contributions using a deemed rate of return – this is based on the 90-day Bank Bill rate plus three percentage points (shortfall interest charge rate).

      The FHSS maximum release amount takes into account the $15,000 limit from any one year and $30,000 total limit to the total contributions across all years when calculating the eligible contributions, before adding the associated earnings.

      See also:

      Shortfall interest charge (SIC) rates

      Shortfall interest charge (SIC) rates - https://www.ato.gov.au/rates/shortfall-interest-charge-(sic)-rates/

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