How Does It Work?

Who can open a First Home Saver account?

To open a First Home Saver account you will need to:

• Be aged 18 to 65
• Have not previously purchased or built a first home in Australia to live in;
• Not currently have or previously have had a First Home Saver account.
• Provide a tax file number.

How do the savings incentives work?

First Home Saver accounts offer a simple, tax effective way to encourage and maximise saving for a first home deposit through a combination of Government contributions and low taxes.

Government contributions

First Home Saver Accounts attract a flat 17% Government contribution on the first $5,500 of personal savings contributed to a First Home Saver account in any year.

Low tax rates 

1. Investment earnings (or interest) that accrues in a First Home Saver account are taxed at a maximum of 15 per cent.
2. Government contributions are tax free.
3. Withdrawals from a First Home Saver account used to purchase or build a first home are tax free.

Adding to your account

• There are no restrictions on who can contribute to an individual’s First Home Saver account, whether it’s the account holder, family member, employer, or friends. All contributions must be from after-tax income, and a tax deduction cannot be claimed.
• There is no minimum annual contribution, but a withdrawal can only be made where contributions of at least $1,000 have been made in each of at least four financial years.
• There is an account balance cap of $85,000, after which no further personal contributions can be made. Note the FHSA account balance cap is periodically indexed in $5,000 increments. This amount is current from the 2011/12 income year.

Cashing out to buy a first home

• Funds can only be withdrawn from a First Home Saver account to put towards purchasing a first home, or building a first home to live in.
• The 4 year rule must first be met (see above).
• The full amount must be withdrawn and the First Home Saver account closed at that time.
  

Buying your first home early

• In the 2010 Budget the Government proposed changes to First Home Saver Account rules that allow you to purchase a house within the minimum 4 year period.
• Funds in your FHSA do not become immediately available, but can be applied to your mortgage once the minimum period has elapsed.
• Contributions can still be made into the FHSA up until settlement occurs. Once settlelement occurs no further contributions can be made.
  
• The First Home Saver Account rule change allowing early purchase became law on 25th May 2011.
  

Special circumstances

If any of the following situations occur, the account must generally be closed and the full amount transferred to a superannuation fund, nominated by the individual. The money is treated like any other after-tax superannuation contribution.  Individuals cannot open another First Home Saver account in the future. 

• If the account holder bought a first home before 25th May 2011, when the rule change allowing early purchase became effective (see above).
• If the account holder reaches age 65
• If the account holder no longer wishes to have a First Home Saver account.

In the event of death, divorce, disablement or severe financial hardship, First Home Saver accounts are generally treated the same as superannuation. In the event of bankruptcy, the balance is treated as though it were a normal savings account.

Where can I open an account?

The majority of First Home Saver accounts currently offered are provided by banks and some credit unions. Superannuation funds (those who hold a public offer licence), building societies and life insurers are also able to offer First Home Saver accounts. See a list of authorised FHSA providers.

 

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This page was last updated on 7 June 2011 to reflect indexation increases to the FHSA Account Balance Cap. This page was updated on 9 July 2010 to reflect increases in the Account Balance Cap, Contribution Threshold and Maximum Government Contribution due to First Home Saver account indexation effective 1 July 2010.