Tax and Provision
Welcome to the very last instalment of the First Home Super Saver (FHSS) overview. Over the past few articles, we have looked briefly into this first homebuyer saving options and gone over some of the items you need to take into consideration. We end here with some directions you can take to seek professional advice on whether the FHSS is the right choice for you.
It is important that you get advice from a financial professional before you make any decisions to salary sacrifice or withdrawn funds from your superannuation. Withdrawing your funds is only possible once, so be sure you have the right advice on hand to make a decision that will give you the best possible outcome.
Make sure you follow the Australia Tax Office (ATO) regulations and conditions for completing requests in the right order and meeting all eligibility requirements. You can see a brief overview here but you should also get information directly from the ATO FHSS scheme website and connect your myGov to the ATO to quickly and easily submit requests and questions.
Other times it is best to get professional assistance regarding your FHSS around correct tax lodgements, loan payment, and financial hardship conditions.
I will go into these briefly for you below but this is just a general guide and you should speak to a professional about your personal circumstances and what financial conditions will be in your best interest.
Lodge your tax
There is still some tax to go. The associated earnings will be taxed at a shortfall interest charge rate.
A payment summary will be sent to you at the end of the financial year showing your maximum and assessable FHSS released amount. These amounts need to be included on the tax return form for the year that you requested the release of funds, which may be different from the tax year that the funds were deposited into your account.
If you are close to the end of the financial year when you make your request for release of funds don't wait until the payment summary arrives as it can take several weeks.
Your release amount must be listed on your tax form but is not included as part of your assessable income because you have previously paid the tax on these amounts. However, this is not the case for the associated earnings (interest earned) on the total amount (from both concessional and non-concessional payments). This still needs to be taxed in the same way interest earned on any savings, investments or royalties is usually listed on your tax form. The amount of tax will depend on the overall margin interest from your annual income for that tax year. The tax payable on this assessable amount will receive a 30% tax offset.
Make sure you let your tax accountant know that you requested FHSS release and give them the date of your release request as well as your FHSS payment summary, or if this is yet to be sent, your determination.
Other conditions that need to be considered
Because your FHSS release amount has already been taxed previously it will not affect family assistance and child support payments.
You are still required to continue paying any study and training loans such as Higher Education Loan Program (HELP), Trade Support Loans (TSL) Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL) and ABSTUDY SSL schemes. You will need to ensure you have enough funds to continue these payments while you save.
Financial hardship provision
There are provisions in place for those who have previously owned property in Australia but have suffered a financial hardship that resulted in a loss of ownership of all property interests such as bankruptcy, divorce or de-facto separation, employment loss, severe illness, natural disaster or grants for early access to superannuation. To be considered under the financial hardship provision you will need to apply to the ATO using their FHSS hardship form or online with your myGov account to see if you are eligible before you make any voluntary payments.
Talk to your conveyancer
When you sign the contract to buy your home you will need a property conveyancer to handle the legal side and manage the settlement of the property. To help your settlement and ownership go smoothly it is best to bring your conveyancer in as early as possible i.e. don't wait until after you have signed a contract.
When you select your conveyancer and go over your plans of home ownership be sure to let them know that you are a first homeowner and any concessions you are receiving, as well as the FHSS scheme. This will allow them to take into consideration the terms and conditions and make sure the timelines for your property purchase match the ATO's requirements. This can include things like being sure the contract is not signed before the determination is obtained, making sure any building work that needs to be done can be completed in time, as well as making sure you have enough money to cover a deposit if there are delays in the release of funds.
Because there are limits, restrictions, and conditions to the release of funds under FHSS it should not be treated like a savings account. Be sure to get professional advice and make careful decisions around the FHSS to be sure you are getting the best for your hard-earned money.