Budget changes to First Home Saver Accounts
The Government’s Budget announcements on 13th May include enhancements to the First Home Saver Account scheme. Now due to be launched on 1st October 2008, First Home Saver accounts are designed to help first home buyers boost their savings for a home deposit through tax concessions and Government contributions. The Budget changes to First Home Saver Account are said to be fairer and simpler, addressing feedback to the initial proposals which many argued were too complex and favoured those on higher incomes.
First Home Saver accounts – an outline
First Home Saver accounts will encourage increased savings by providing significantly higher after-tax returns than conventional savings accounts.
- The first $5000 p.a. saved in a First Home Saver Account will attract a 17 per cent contribution from the Australian Government.
- Earnings on the account will be taxed at a low 15%.
- An overall account balance limit of $75,000 (indexed) applies, after which no further personal contributions can be made (earnings can keep growing).
- Withdrawals can only be made after contributions of at least $1,000 have been made in at least four separate financial years.
- Withdrawals are tax free when the money is used to buy or build a first home to live in.
Budget changes at a glance – simpler & fairer
First Home Saver account feature | Post Budget 08 | Proposed pre Budget 08 |
|---|---|---|
Government contributions | The government will pay a contribution of 17% of the first $5,000 (indexed) saved each year. | The government will pay a variable contribution of 15% - 30% of the first $5,000 (indexed) saved each year. |
Initial contribution to open account | No minimum | Minimum $1,000 |
| Annual personal contribution limit | Within lifetime limit | $10,000 (indexed) |
| Lifetime limit on personal contributions | $75,000 (indexed) cap on account balance | $50,000 (indexed) cap on personal contributions |
Launch Date | 1st October 2008 | 1st July 2008 |
