Finance Battle: HISA vs FHSSS

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In this lineup let's see the difference in FHSSS and HISA.



FHSSS

$10K put into FHSS ends up as $8,500.

Lets assume 4% deeming rate, so you can withdraw =$8,500 x 104% = $8,840.

Now you withdraw with

  • MTR 32%: = 8,840 x (100% - 32% + 30%) = $8,663.2
  • MTR 39%: = 8,840 x (100% - 39% + 30%) = $8,044.4
  • MTR 47%: = 8,840 x (100% - 47% + 30%) = $7,337.2

HISA

$10K income into HISA. Lets assume 5.5% return.

  • MTR 32%: = 10,000 x (100 - 32%) x (100% + 5.5% x (100% - 32%)) = $7,054
  • MTR 39%: = 10,000 x (100 - 39%) x (100% + 5.5% x (100% - 39%)) = $6,304
  • MTR 47%: = 10,000 x (100 - 47%) x (100% + 5.5% x (100% - 47%)) = $5,454


FHSS Relative Improvement Relative to HISA

So how much better if FHSS after just 1 year?

  • MTR 32%: = (8,663.2 - 7054) / 7054 = 22.8%
  • MTR 39%: = (8,044.4 - 6304) / 6304 = 27.6%
  • MTR 47%: = (7,337.2 - 5454) / 5454 = 34.5%

ANZ FHSS Calculator

This calculator compares over 4-7 years which is an improvement over my above calculation. I believe it also includes the impact of the withdrawal pushing up a tax bracket.

  • MTR 32% (80K Income) = (49,169 - 36,404) / 36,404 = 35.0%
    • Contribute $14,475 pa for 4 years
  • MTR 39% (140K income) = (45,891 - 36,118) / 36,118 = 37.4%
    • Contribute $13,900 pa for 4 years
  • MTR 47% (190K income) = (46,782 - 33,368) / 33,368 = 40.2%
    • Contribute $8,150 pa for 7 years

DIV293

If your div293 income excluding super is over $250k then the extra money you put into super will get DIV293. This might not reduce how much you can pull out, but it will impact your effective return.

MTR 47%: = (7,337.2 - 5454 - 1500) / 5454 = 7%

So still more but not by much.

My reading is the withdrawal will not impact div293 as the withdrawal is added then subtracted, I think.

Withdrawal Tax Bracket 

As the withdrawal might push you into the next tax bracket, what does that do you the return? Alternatively you might get there with a higher wage.

Let's say you make the top of each bracket and the withdrawal pushes you into the next.

  • MTR 32%: = (8,044.4 - 7054) / 7054 = 14% (was  22.8%)
  • MTR 39%: = (7,337.2 - 6304) / 6304 = 16.4% (was 27.6%)
  • MTR 47%: NA

Super Investment Option

The general rule is don't invest money into the share market that you need in 5 years. Yet that is exactly what FHSSS is doing. While a market crash will not reduce how much you can withdraw, it will hurt you are 60. As such if I was to use it I would have the portion I'm using for my deposit in cash. Alternatively, using the balanced option and moving to high growth after width drawing can be considered.

Conclusion

Under all scenarios you are better off using FHSSS over HISA. 

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