- Abolition of the first home saver accounts (FHSA) scheme
In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme;
- New accounts from 7.30pm, Tuesday 13 May 2014 will not be able to access any concessions or the government contribution.
- Eligibility for a government contribution will cease from 1 July 2014. Existing account holders will continue to receive the government contribution for personal contributions made during the 2013-14 income year.
- Tax and social security concessions will cease from 1 July 2015. Existing account holders will continue to receive all tax and social security concessions associated with these accounts for the 2013-14 and 2014-15 income years.
- Restrictions on withdrawals will be removed from 1 July 2015.
Once the first home saver account scheme is abolished from 1 July 2015, these accounts will be treated like any other account held with a provider, in the meantime the existing rules will continue to apply until the law is changed.
First home saver accounts offer an effective way of saving for your first home because your savings are increased by government contributions. These contributions are a percentage of your own contributions, up to a limit each year.
It’s a special purpose account because you must use the money you save for the deposit or other costs you incur when you buy or build your first home. It’s more like a term deposit than a normal everyday account because you have to keep the money in the account for a minimum period of time.
If you lose your eligibility to hold an account or you do not buy a house and close the account the money must be contributed to your superannuation unless other conditions are met.
You can’t make partial withdrawals. The only time you can withdraw from the account is to close it and you can generally only do that after the minimum qualifying period has passed.
There are several good reasons to open a first home saver account. The more money you save, the more the government will contribute – up to a limit each year.
You need to understand the separate rules for eligibility to:
- Open an account
- Make contributions
- Receive the government contribution
- Access your funds
Opening an account
Not all first home saver accounts are the same. Choose the account provider you want to have your account with and read their product disclosure statement to find out more. Banks, building societies, credit unions, life-insurance companies, friendly societies and trustees of public-offer super funds can all offer first home saver accounts.
Building your account
Once you’ve opened an account, you can deposit into it as often or infrequently as you like. Other people (such as your parents or other family members) can also deposit into your account. (Deposits are also referred to as ‘personal contributions’ to distinguish them from government contributions.)
The government will make a contribution equal to 17% of your personal contributions for the financial year, up to a maximum amount each year.
Closing your account
When you withdraw from the account you have to take all the money at once and close the account; you cannot make partial withdrawals.
There are rules about when you are entitled to withdraw the funds. The funds you don’t use for a home must be paid into your superannuation (unless you’ve reached 60 years of age). You cannot ever open another first home saver account after you purchase a home or have the balance paid to superannuation.