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 will be taxed at a maximum of 15 per cent.
2. Government contributions will be tax free.
3. Withdrawals from a First Home Saver account used to purchase or build a first home will be 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.
• The is an account balance cap of $80,000, after which no further personal contributions can be made.

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• Funds can only be withdrawn from a First Home Saver account to put towards purchasing a first home, or building a first home to live in.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• The full amount must be withdrawn and the First Home Saver account closed at that time.
• In the 2010 Budget the Government proposed changes to First Home Saver Account rules that would allow you to purchase a house within the minimum 4 year period. Funds in your FHSA would not become immediately available, but could still be used on your mortgage once the minimum period has elapsed (and other qualifying conditions are met).

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 an account holder buys a first home before the minimum 4 year contribution period has been reached (using other savings or earnings). Note this rule is subject to changes proposed in the 2010 Budget, which are yet to be passed into law (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 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.