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First Home Saver Accounts

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We hope you all have a great and safe Easter break.  This month’s Wealth Pipeline looks at First Home Saver Accounts.

First Home Saver Accounts

First Home Saver Accounts (FHSAs) are an under-utilised savings scheme to help first home owners. 

The below table summarises the mechanics of how FHSAs work.  It is in no way an exhaustive list.

Feature Summary

Eligibility to open an account

  • aged 18-64
    • not previously owned a home in Australia in which they have lived
  • provide TFN and meet proof-of-identity requirements

Government co-contribution

17% of personal contributions up to a maximum of $1,020 p.a. 1

Account balance cap

$90,0002

Tax rate – earnings

15%

Tax free withdrawals (satisfying a condition of release)
  • to purchase 1st home to live in (if contributions $1,000 or more are made annually over at least 4 years)
  • to transfer to a super fund (as a non-concessional contribution)
  • to transfer to a genuine mortgage (after satisfying the 4 financial year qualifying period)
  • to transfer to another FHSA
  • at or after age 60

1 Indexed annually with AWOTE

2 Lifetime cap amount for 2012/13, indexed annually with AWOTE and rounded down to the nearest $5,000.
Who Benefits from FHSAs?

FHSAs are ideal for soon to be first home owners that intend on making their first home purchase after they have met the 4 year FHSA qualifying period.  It is also ideal for those that are likely to make a purchase within the FHSA qualifying period that can afford to wait until they satisfy a condition of release to transfer the account balance to their mortgage.  Typically, those that fall into the latter category are those that do not require the funds in their FHSA to avoid lenders’ mortgage insurance.

FHSAs are an ideal way for parents or grandparents who want to assist their loved ones purchase their first home.  There are no restrictions on who can make FHSA contributions.

Maximum Government Contributions

The current maximum government contribution of $1,020 p.a. is based on a $6,000 per year contribution.  This contribution is not taxable. 

Considerations

Please take note that if you choose to buy your home before the 4 year qualifying period is up, then you have the choice to use this money to pay your mortgage once the qualifying period is over.  In order to do this you must notify your account provider within 30 days of your purchase of the home.  Otherwise you will become ineligible to hold the account and the balance will be contributed to your superannuation fund unless you are at or over age 60 at the time.

By: July 28, 2012 Saving Tags: , , ;