First Home Saver Accounts - consultation begins on budget changes

First Home Saver Account rule changes allowing early house purchase now in draft legislation, Treasurer invites public comment.

FHSA’s have been slow to take off since their launch in Oct 2008 with fewer than 20,000 accounts opened to date. The $1.2 billion scheme was designed to help 730,000 Australians within its first 4 years, and while many Australians continue to worry that they will never be able to buy a home, overly restrictive rules are seen to have held people back from taking advantage of the scheme.

Reaffirming a commitment to make it easier for families to save for and buy their first home, the Government announced changes to the First Home Saver Account scheme in the 2010 budget. A key criticism of the scheme will be addressed, where an account holder purchasing a home before the four year minimum qualifying period has been met will no longer have their savings forced into superannuation.

Once the legislation is passed, account holders will be able to decide when to buy a house and still retain the benefits of their account for contributing towards a mortgage.

First Home Saver Account proposed changes - key points:

• Early first home purchases no longer penalised due to changing circumstances,
• Change will allow savings in a FHSA to be paid into a mortgage rather than forced into superannuation,
• No further personal contributions can be made into a FHSA once a home is purchased,
• Money must still be held in the FHSA until the end of the minimum qualifying period (usually four years),
• If the home is sold before the end of the minimum qualifying period, the FHSA monies must be paid into superannuation,
• Only applies to houses purchased after the new legislation is passed (date TBC),
• Existing First Home Saver Accounts will qualify.

“This is a big win for first home hunters, giving them the flexibility to choose when to buy a house and still direct the full benefits of the First Home Saver Account towards their home” said the Treasurer in his press release.

While the greater flexibility will be welcomed by people whose circumstances change due to windfall gains (such as inheritance),  the proposed changes won’t allow the money in a First Home Saver Account to be used towards a deposit if an account holder wants to buy a home within the 4 year qualifying period. Given this, it remains to be seen whether these changes go far enough to see First Home Saver Accounts become the best way to save for a first home. The good news is the Government remains committed to seeing the scheme become a success.

The draft legislation is available at treasury.gov.au and interested parties are invited to comment on the proposed changes. Public consultation closes on 4 November 2010.

Have your say here on the Government's proposed First Home Saver Account changes