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Keeping the dream of home ownership alive
Thursday, 15 May 2008
Young Australians are struggling to buy their first home with affordability at all time lows. The Government’s decision to introduce First Home Saver Accounts is a great initiative to help people build a bigger deposit for their first home than traditional savings accounts.
First Home Saver Accounts will attract bonus money from the Government and benefit from low tax rates, so for example a couple each earning average incomes and putting aside 10 per cent of their money into a First Home Saver Account, could save a deposit of more than $88,500 after five years of disciplined savings. This is up to $12,600 more than they would have saved otherwise.
How Does It Work?
Wednesday, 01 October 2008
First Home Saver accounts are a new type of investment account designed to help Australians boost their savings for a deposit on their first home. This Government initiative enables super funds and banks to offer a superannuation style investment account that helps maximise savings through tax breaks and Government contributions.
First Home Saver accounts are concessionally taxed (like superannuation), meaning that generally much lower tax will be paid on the investment or interest earnings of First Home Saver accounts, than for regular savings accounts or managed investments.
Case Studies
Thursday, 15 May 2008
First Home Saver Account – A case study
With the recent Federal Budget changes to the First Home Saver scheme personal contributions of up to $5,000 will be rewarded with a flat 17% government contribution, regardless of marginal tax rates.
Example 1 – First Home Saver after Budget changes
On 1 October 2008, Belinda and Josh each open their own First Home Saver Accounts.
They both earn average wages of $61,000 and save 10 per cent of their salary to their individual accounts. Each receives a 17 per cent Government contribution on the first $5,000 of contributions made to their accounts each year.
After five years, Belinda and Josh will together have saved a deposit of around $88,500 to buy their first home.
This compares to a house deposit of around $75,900 if Belinda and Josh had saved using a term deposit with the same 7 per cent earnings rate and the same contributions.
Belinda and Josh will benefit from using First Home Saver Accounts by around $12,600 after 5 years.*
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