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First Home Saver Accounts -> Transfer to Super

Discussion in 'Accounting, Tax & Legal' started by archangelsupreme, 15th Sep, 2008.

  1. archangelsupreme

    archangelsupreme Well-Known Member

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    Australia
    I'm not sure at the momment whether I want to open a FHSA....as I don't want the money to be locked away for 4 years.

    Though it mentions, that after 4 years if you don't want to use it to purchase your own home you can transfer it all to Super. My question is will this be taxed again (i.e. 15%) as per the regular super contribution tax?

    Do you guys think it is worthwhile to contribute the minimum each year, i.e. $5000 to reap the $850 gov contribution each year and transfer the whole lot to Super.....or to continue salary sacrificing?
     
  2. eddyl

    eddyl Well-Known Member

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    My understanding was that you contributed to this account at you're marginal tax rate. You could not salary sacrifice into this account. The favourable tax treatment would come in the form of the low tax on earnings within the account.
    This would suggest that you would have to pay the contributions tax if you did transfer the cash to your super.

    Have you found any companies offering this product yet?
     
  3. archangelsupreme

    archangelsupreme Well-Known Member

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    With only 3 weeks to go until October...i haven't seen anything.

    But I guess in my case, it would probably be better to just leave the money in offset.
     
  4. ashwright

    ashwright Well-Known Member

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    Assuming you are not taxed when transferring to super (you have already paid tax at teh marginal rate).
    Also assuming you are on the 31.5% tax rate.

    Putting $5000 into the FHSA, I would get $850 from the gov, so I would have $5850, in the account.
    To get the $5000 I would have to earn $7299.27 [before tax, 5000 / (1-31.5%) ].

    If I salary sacrificed that money into super, I would have $6204.38 [tax paid on super contrib 7299.27 * (1- 15%) ].


    So you will pay more tax, even with he government contribution, by using the FHSA. You are better off, just putting the money straight into super.

    btw. If you are on a higher tax bracket, the difference is even worse.
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Hi ArchAngelSupreme,

    Answers below in light blue :)

    There are no product providers offering this product until the 1st October 2008 when the tax environment (First Home Saver Accounts) legally exists. Before this date there is no concessional tax rate to save funds for purchasing your own home.

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner.
     
  6. eddyl

    eddyl Well-Known Member

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    Location:
    Sydney

    What you have to consider is that earnings are only taxed at 15% in this account. So the low tax environment will be beneficial to those on a high tax bracket, assuming they leave the money in this account for a while.
     
  7. ashwright

    ashwright Well-Known Member

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    Yes, but earnings are only taxed at 15% in super as well. So that is not a benefit over super.

    What I was thinking was the biggest benefit is that you can access the money before you turn 60. Super is unattractive to me, as I do not want to wait 35+ years to access it. I could instead save the money in the FHSA for 10 years or so, then I can spend it on a house (which I can then sell, or convert to an IP, after 1 year.) This way I can access the income from the savings before I retire.