First home saver account

First Home Saver Accounts (FHSAs) were a 2007 election policy of the Australian Labor Party. FHSAs were offered from 1 October 2008 after a consultation period and passage of the First Home Saver Account Act 2008^[1] through the Australian Parliament.

FHSAs offer several benefits to first home savers including:

1. a variable interest rate;
2. a tax rate of 15% (cf the individual's marginal tax rate), that is paid by the FHSA provider;
3. 17% government contribution, up to a specified limit.
4. Tax-free withdrawal.
5. Flexibility in determining how much is contributed, up to a maximum account balance cap over the life of the FHSA.^[2]

In the 2014-15 Federal Budget, the Federal Government announced plans to wind back and abolish the FHSA scheme.^[3]

Eligibility[]

To become a FHSA holder an individual must:

• be aged at least 18 and under 65 years
• have and quote a tax file number in their application
• not have previously owned a home in Australia that was their main residence
• not have previously had a first home saver account.^[4]

Government FHSA Contribution[]

For each dollar contributed to a FHSA during a financial year, the government contributes 17 cents up a specified limit.^[5] This limit will increase through indexation.^[6]

• For the 2008/09 and 2009/10 financial years, the Government FHSA contribution limit was $850. Therefore, to have been eligible for the full amount of the Government FHSA Contribution, the FHSA holder had to contribute $5000.
• For the 2010/11 financial year, the Government FHSA contribution increased to $935. Therefore, a FHSA holder must contribute $5500 to their account during the 2010/11 financial year to be eligible for the full amount of the Government Contribution.^[7]

Government FHSA Rates and Thresholds[]

ATO's rates and threshold page:^[8]

Income Year: Ends 30 June in the given year. Contributions must be received by the fund prior to this date.

Account balance cap: If the balance of the FHSA account exceeds the 'Account balance cap', then the government contribution will be 0.

Contribution Threshold: The governments 17% match will only apply for contributions at, or below this level. Contribute this amount each year to take full advantage of the FHSA scheme.

Maximum government contribution: If the 'Contribution Threshold' is met or exceeded in any financial year, this is the amount the government will contribute.

Withdrawing funds[]

To be eligible to close their FHSA and access the funds, an individual must:

• contribute at least $1,000 per year to their account in at least four financial years – the ‘four year rule’
• intend to use the funds to buy or build their first home.^[9]

Mortgage diversion[]

During his 2010 Budget Speech, the Treasurer, Hon Wayne Swan MP announced changes to the operation of FHSA accounts.^[10] Previously, when a FHSA holder purchased a house, thus making them ineligible to hold a FHSA, the funds in their FSHA would be transferred to their superannuation account.^[11] Under the proposed changes, the Government would allow funds in a FHSA to be paid into an approved mortgage after the FHSA holder satisfied the four year rule.^[10]

On 6 October 2010, the Treasurer released an exposure draft on the new measures for public consultation.^[12]

On 24 February 2011, Tax Laws Amendment (2011 Measures No. 1) Bill 2011 was introduced to Parliament.^[13] On 10 May 2011 it passed both Houses, receiving Royal Assent on 25 May 2011.^[13] According to sub-clause 2(1) of the Bill, the changes to the FHSA Act became law on 26 May 2011.^[14]

Take-up[]

As at the December 2013 quarter, the Australian Prudential Regulation Authority website states there are 46,000 FHSAs containing A$521.5m.^[15]

Abolition[]

In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme:

1. New accounts created in respect of applications made from 7.30pm, Tuesday 13 May 2014 will not be able to access any concessions or the government contribution.
2. 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.
3. 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.
4. Restrictions on withdrawals will be removed from 1 July 2015.^[3]

Lists of FHSA providers[]

As at 21 May 2013, the Australian Prudential Regulation Authority website lists the following institutions as FHSA providers:^[15]

• AMP Bank Limited - ABN 15 081 596 009
• Australia and New Zealand Banking Group Limited* - ABN 11 005 357 522
• Big Sky Building Society Limited* - ABN 30 087 652 079
• Commonwealth Bank of Australia* - ABN 48 123 123 124
• Beyond Bank Australia* - ABN 15 087 651 143
• Credit Union SA Ltd - ABN 36 087 651 232
• Defence Bank Limited* - ABN 57 087 651 385
• Hume Building Society Ltd - ABN 85 051 868 556
• Hunter United Employees' Credit Union Limited - ABN 68 087 650 182
• IMB Ltd - ABN 92 087 651 974
• Members Equity Bank Pty Limited* - ABN 56 070 887 679
• MyState Financial Limited* - ABN 89 067 729 195
• Police Financial Services Limited - ABN 33 087 651 661
• Railways Credit Union Limited - ABN 91 087 651 090
• Teachers Mutual Bank Limited - ABN 30 087 650 459
• The Police Department Employees' Credit Union Limited - ABN 95 087 650 799
• Victoria Teachers Limited - ABN 44 087 651 769
• Wyong Council Credit Union Ltd - ABN 29 087 650 897
• * means the provider no longer offers new FHSAs.

References[]

External links[]

• First Home Saver Account ATO website
• First Home Saver Account on ASIC's MoneySmart website
• APRA First Home Saver Account website
• First Home Saver Account Treasury website