Savings Assistance

First Home Savers Accounts

First home saver accounts (FHSA) is a new deposit saver scheme designed by the government to provide a tax effective way to help first home buyers kick start saving for a first home.

“This is a long-term measure designed to assist young Australians to achieve their dream of home ownership'’ says Rhonda Grant of Financial Dynamics.

These accounts will be available from financial institutions (including banks and super funds) on 1st October 2008.

Eligibility

To open a FHS account you need to:

be aged over 18 and under 65 years

have a tax file number you can quote in your application

have never owned a home in Australia that has been your main residence

have never previously had a first home saver account.

How it Works

After each financial year, you’ll receive a government contribution based on your personal contributions during that year. When you’re ready to buy or build your first home, you withdraw the funds and close your account.

The government will make a contribution on top of your personal contributions after:

you lodge your tax return (or notify the ATO if you don’t need to lodge a tax return), and
your account provider has reported your personal contributions to the ATO.

If you decide not to go ahead with buying or building your first home, you generally can’t withdraw the funds – you’ll have to put them towards your super.

Benefits

The government will make a contribution equal to 17% of your personal contributions for the financial year up to a maximum of $850( for the 2008–09 year). So if you contribute $5,000 or more to your account (during the 2008–09 year), the government will contribute $850 to your account.
The maximum annual government contribution will be indexed over time.
Earnings on first home saver accounts are taxed at 15% but this is payable by the account provider.
You don’t have to report any income you earn from your account on your tax return.
Withdrawing your money is tax free.
You can deposit as little or as much as you like every year, up to a maximum account balance cap (the cap is $75,000 for the 2008–09 financial year and will be indexed over time). This amount includes any earnings over the years and contributions the governemnt has made.

Your Account

Choose the account provider you want to have your account with and read their product disclosure statement.

Your first home saver account must be an individual account, not a joint account. However, if you want to buy a home jointly you can.

You can’t salary sacrifice into a first home saver account -make your contributions from your after-tax income.

Make personal contributions of at least $1,000 for each of four financial years (not necessarily consecutive years) before you can withdraw the money to buy or build your home or contribute to your superannuation fund.

Other people (such as your parents or other family members) can help you out by contributing to your account.

You can only ever open one first home saver account.

You can’t withdraw the money whenever you want or just withdraw a portion of the money - you have to withdraw all of it (ie for buying or building your home or contributing to your superfund) and close your account. The withdrawal is tax-free.

When you reach the age of 65, your provider must close your account. The funds can be paid to you or, if you don’t advise your account provider before your birthday that you want this, they will transfer the funds into your super.

Buying your first home

You need to:

1/Make the payment towards buying or building your first home within six months of withdrawing the funds. This can include paying:

- a deposit for the purchase of an existing home

- a deposit or instalments for a home and land package

- for the purchase of vacant land on which your home will be built

- a deposit or instalments for the construction of a home on land you own

- incidental costs you incur in buying or building the home, such as legal expenses, council fees and stamp duty.

2/Meet the occupancy rule. That is, you need to live in your home for at least six months as your main residence. The six month period must start within 12 months of:

- your purchase settlement day, or

- the building completion date.