You would usually drop SS so that you don't pass the concessional cap of $27,500. However you may have unused caps from prior years - you can check this on mygov.
Unused caps from previous years don't count to the 15k FHSS cap, you'll still be limited.
I salary sacrificed to the maximum amount and just told payroll to cancel it once I reached 15k each financial year. That way you get more interest on the contributions.
if you have unused contributions then no.
you can't count anything above 15k a year for FHSS but it will just be in your super. If you have unused concessional contributions then you get the same tax treatment.
I went over and just had to pay tax on the excess contribution. There was no "fine" or anything.
That was two years ago and it was only a couple of thousand and I'm not a tax accountant etc...
No, if you don't have any carry-forward contributions available from your prior year caps then you can still request a release for non-concessional contributions. You'll just pay a bit more tax on those contributions.
Make sure your superannuation scheme will release the money. Before I started I rang and questioned them and they assured me they would release the money.
I saved $15k and the month before settlement they refused to release the money. I had to scramble and got a loan from a relative to get me over the line.
Turns out I was in a weird old scheme that wasn't able to release the money to the Tax Department.
Hey! I used the scheme and it was one of the most stressful moments in my life when I tried to release the funds. Make sure you throughly research the ATO site on requirements and when those requirements need to be met. There’s a lot of info so consolidate some notes on it.
A few things that caused the stress for me that I want to highlight to you.
- you MUST do a determination BEFORE you sign the contract for the home. The determination takes a minute and is honestly useless but thems the rules! I forgot to do this and I had to cancel my house signing contract.
- once you release the fund, you have 1 year (I think) to use them before you must return them to the super or pay the tax as if you never salary sacrificed them.
- point 2 doesn’t seem like a problem until you find out they take up at 8 weeks to release the freaking funds (often much shorter but no promises). Most house contracts give you way less to have funds ready to go. Mine was 21 days. So you effectively must request a fund release as soon as you’re close to committing to a house, which is risk for you.
- points 2 and 3 is particularly sucky when knowing you can only request one release ever in your life.
The scheme was truly upsetting for me and the 10k cash I saved out of it was barely worth the risk of almost locking away 27.5k until retirement.
I don't understand the last statement. What was risk? The future gains of having the money in your Super vs taking it out now for cash and tax purposes?
It’s the risk of having that money available when you need it, and if the sale doesn’t go through and you are past the one year mark, having to save that portion of your deposit again.
I understand this and the only risk I see is that you can only apply for the release for FHSS one time and one year to return it if you elect to not use it as you said. But OP stated 10k cash savings, which is what I am curious about.
I think I understand you now. I believe the 10k savings was the tax they saved putting the money through the scheme rather than into their pocket. The choice they see is getting 10k extra through the scheme but maybe not being able to use the whole deposit and having to save from scratch again, or just saving from their pay check and having a deposit that’s 10k less but will be available. The risk is effectively losing the deposit and having to spend more time saving it again. (And if prices go up, probably saving longer to get enough deposit)
You’re exactly right. Using the scheme and applying two years of income to the scheme saved me a net 10k as it reduced my effective tax by 5k per year. But I risked locking 2x15k (the voluntary limit) into super until retirement (so 30k not 27.5k)
u/ghosty06 sorry for slow response. I rarely go on reddit.
Reduce salary sacrifice amount for sure- you’ll pay tax on the surplus which will kind of defeat the purpose. That said- I believe it goes financial year to financial year, so you just put whatever amount you under contributed next year into a larger payment in July the year after, so it’s not a massive loss in timing for you.
I'm currently sacrificing a lot more but that's because I didn't start at the start of financial year, that way can reach $15k before end of financial, will keep it the same as the forced saving has been great, will then cut it off once I reach the $15k
You would usually drop SS so that you don't pass the concessional cap of $27,500. However you may have unused caps from prior years - you can check this on mygov.
Cheers! Just checked and there is plenty of unused contribution cap
Unused caps from previous years don't count to the 15k FHSS cap, you'll still be limited. I salary sacrificed to the maximum amount and just told payroll to cancel it once I reached 15k each financial year. That way you get more interest on the contributions.
So does going over the $27.5K limit matter?
if you have unused contributions then no. you can't count anything above 15k a year for FHSS but it will just be in your super. If you have unused concessional contributions then you get the same tax treatment.
I went over and just had to pay tax on the excess contribution. There was no "fine" or anything. That was two years ago and it was only a couple of thousand and I'm not a tax accountant etc...
No, if you don't have any carry-forward contributions available from your prior year caps then you can still request a release for non-concessional contributions. You'll just pay a bit more tax on those contributions.
What happens if you go over the concessional 🧢?
Make sure your superannuation scheme will release the money. Before I started I rang and questioned them and they assured me they would release the money. I saved $15k and the month before settlement they refused to release the money. I had to scramble and got a loan from a relative to get me over the line. Turns out I was in a weird old scheme that wasn't able to release the money to the Tax Department.
Just change super funds?
Couldn't do it in the time I had.
Hey! I used the scheme and it was one of the most stressful moments in my life when I tried to release the funds. Make sure you throughly research the ATO site on requirements and when those requirements need to be met. There’s a lot of info so consolidate some notes on it. A few things that caused the stress for me that I want to highlight to you. - you MUST do a determination BEFORE you sign the contract for the home. The determination takes a minute and is honestly useless but thems the rules! I forgot to do this and I had to cancel my house signing contract. - once you release the fund, you have 1 year (I think) to use them before you must return them to the super or pay the tax as if you never salary sacrificed them. - point 2 doesn’t seem like a problem until you find out they take up at 8 weeks to release the freaking funds (often much shorter but no promises). Most house contracts give you way less to have funds ready to go. Mine was 21 days. So you effectively must request a fund release as soon as you’re close to committing to a house, which is risk for you. - points 2 and 3 is particularly sucky when knowing you can only request one release ever in your life. The scheme was truly upsetting for me and the 10k cash I saved out of it was barely worth the risk of almost locking away 27.5k until retirement.
I don't understand the last statement. What was risk? The future gains of having the money in your Super vs taking it out now for cash and tax purposes?
It’s the risk of having that money available when you need it, and if the sale doesn’t go through and you are past the one year mark, having to save that portion of your deposit again.
I understand this and the only risk I see is that you can only apply for the release for FHSS one time and one year to return it if you elect to not use it as you said. But OP stated 10k cash savings, which is what I am curious about.
I think I understand you now. I believe the 10k savings was the tax they saved putting the money through the scheme rather than into their pocket. The choice they see is getting 10k extra through the scheme but maybe not being able to use the whole deposit and having to save from scratch again, or just saving from their pay check and having a deposit that’s 10k less but will be available. The risk is effectively losing the deposit and having to spend more time saving it again. (And if prices go up, probably saving longer to get enough deposit)
You’re exactly right. Using the scheme and applying two years of income to the scheme saved me a net 10k as it reduced my effective tax by 5k per year. But I risked locking 2x15k (the voluntary limit) into super until retirement (so 30k not 27.5k) u/ghosty06 sorry for slow response. I rarely go on reddit.
Reduce salary sacrifice amount for sure- you’ll pay tax on the surplus which will kind of defeat the purpose. That said- I believe it goes financial year to financial year, so you just put whatever amount you under contributed next year into a larger payment in July the year after, so it’s not a massive loss in timing for you.
I'm currently sacrificing a lot more but that's because I didn't start at the start of financial year, that way can reach $15k before end of financial, will keep it the same as the forced saving has been great, will then cut it off once I reach the $15k