Changes to First Home Saver Account scheme allowing early purchase finally clear Parliament, bill awaits royal assent to come into effect.

Legislation to improve the flexibility of the First Home Saver Account scheme has passed both houses, exactly a year after being announced in the 2010 budget.

The rule changes will enable money in a First Home Saver Account to be paid into an account holder’s mortgage, if they buy a first home earlier than existing rules allow. While the funds will not be immediately available for use towards a deposit, the account can remain open (with no further contributions allowed) and after meeting the 4 year minimum qualifying period the money will be available to pay down the first home buyer’s mortgage.

Under the original rules, early purchasers would see their FHSA balance forced into superannuation.

First Home Saver Account rule changes - key points:

This change improves the flexibility of the First Home Saver Account scheme, and is a welcome recognition from the Government that first home buyers want to be able to make purchasing decisions appropriate to their changing circumstances.

Tell us what you think about the FHSA rule changes

Submissions supportive of proposed budget changes, but say greater flexibility required. 

Public submissions received by Treasury on increasing the flexibility of First Home Saver Accounts are universally supportive of the rule changes proposed in the 2010 budget, but are encouraging the Government to take greater steps.

Leading industry bodies are calling for even greater simplification to address poor take up, with strong appeals to reduce or remove the four year rule.

“While the ABA supports legislative amendments that improve flexibility, we believe further legislative changes, including the removal of the 4 year qualifying rule, is needed to increase the flexibility, simplicity and popularity of FHSAs” said the Australian Bankers Association.

Abacus, the industry body for credit unions, mutual building and friendly societies said “the four-year ‘lock-up’ requirement is too long and is the single most important disincentive for savers. Abacus recommends that the Government should remove or reduce the period of time...”

While the AIST representing the not-for-profit superannuation sector suggested “...inflexibility of FHSAs is a key reason for their poor uptake to date” and “encourages the Government to do more to increase the flexibility”.

Read the submissions here