First home saver account

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First Home Saver Accounts (FHSAs) were a 2007 election policy of the Australian Labor Party. FHSAs were offered from 1 October 2008 after a consultation period and passage of the First Home Saver Account Act 2008[1] through the Australian Parliament.

FHSAs offer several benefits to first home savers including:

  1. a variable interest rate;
  2. a tax rate of 15% (cf the individual's marginal tax rate), that is paid by the FHSA provider;
  3. 17% government contribution, up to a specified limit.
  4. Tax-free withdrawal.
  5. Flexibility in determining how much is contributed, up to a maximum account balance cap over the life of the FHSA.[2]

In the 2014-15 Federal Budget, the Federal Government announced plans to wind back and abolish the FHSA scheme.[3]

Eligibility[edit]

To become a FHSA holder an individual must:

  • be aged at least 18 and under 65 years
  • have and quote a tax file number in their application
  • not have previously owned a home in Australia that was their main residence
  • not have previously had a first home saver account.[4]

Government FHSA Contribution[edit]

For each dollar contributed to a FHSA during a financial year, the government contributes 17 cents up a specified limit.[5] This limit will increase through indexation.[6]

  • For the 2008/09 and 2009/10 financial years, the Government FHSA contribution limit was $850. Therefore, to have been eligible for the full amount of the Government FHSA Contribution, the FHSA holder had to contribute $5000.
  • For the 2010/11 financial year, the Government FHSA contribution increased to $935. Therefore, a FHSA holder must contribute $5500 to their account during the 2010/11 financial year to be eligible for the full amount of the Government Contribution.[7]

Government FHSA Rates and Thresholds[edit]

ATO's rates and threshold page:[8]

Income Year Account balance cap Contribution threshold Maximum government contribution
2013-14 $90,000 $6,000 $1,020
2012-13 $90,000 $6,000 $1,020
2011-12 $85,000 $5,500 $935
2010-11 $80,000 $5,500 $935
2009-10 $75,000 $5,000 $850
2008-09 $75,000 $5,000 $850

Income Year: Ends 30 June in the given year. Contributions must be received by the fund prior to this date.

Account balance cap: If the balance of the FHSA account exceeds the 'Account balance cap', then the government contribution will be 0.

Contribution Threshold: The governments 17% match will only apply for contributions at, or below this level. Contribute this amount each year to take full advantage of the FHSA scheme.

Maximum government contribution: If the 'Contribution Threshold' is met or exceeded in any financial year, this is the amount the government will contribute.

Withdrawing funds[edit]

To be eligible to close their FHSA and access the funds, an individual must:

  • contribute at least $1,000 per year to their account in at least four financial years – the ‘four year rule’
  • intend to use the funds to buy or build their first home.[9]

Mortgage diversion[edit]

During his 2010 Budget Speech, the Treasurer, Hon Wayne Swan MP announced changes to the operation of FHSA accounts.[10] Previously, when a FHSA holder purchased a house, thus making them ineligible to hold a FHSA, the funds in their FSHA would be transferred to their superannuation account.[11] Under the proposed changes, the Government would allow funds in a FHSA to be paid into an approved mortgage after the FHSA holder satisfied the four year rule.[10]

On 6 October 2010, the Treasurer released an exposure draft on the new measures for public consultation.[12]

On 24 February 2011, Tax Laws Amendment (2011 Measures No. 1) Bill 2011 was introduced to Parliament.[13] On 10 May 2011 it passed both Houses, receiving Royal Assent on 25 May 2011.[13] According to sub-clause 2(1) of the Bill, the changes to the FHSA Act became law on 26 May 2011.[14]

Take-up[edit]

As at the December 2013 quarter, the Australian Prudential Regulation Authority website states there are 46,000 FHSAs containing A$521.5m.[15]

Abolition[edit]

In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme:

  1. New accounts created in respect of applications made from 7.30pm, Tuesday 13 May 2014 will not be able to access any concessions or the government contribution.
  2. Eligibility for a government contribution will cease from 1 July 2014. Existing account holders will continue to receive the government contribution for personal contributions made during the 2013-14 income year.
  3. Tax and social security concessions will cease from 1 July 2015. Existing account holders will continue to receive all tax and social security concessions associated with these accounts for the 2013-14 and 2014-15 income years.
  4. Restrictions on withdrawals will be removed from 1 July 2015.[3]

Lists of FHSA providers[edit]

As at 21 May 2013, the Australian Prudential Regulation Authority website lists the following institutions as FHSA providers:[15]

  • AMP Bank Limited - ABN 15 081 596 009
  • Australia and New Zealand Banking Group Limited* - ABN 11 005 357 522
  • Big Sky Building Society Limited* - ABN 30 087 652 079
  • Commonwealth Bank of Australia* - ABN 48 123 123 124
  • Beyond Bank Australia* - ABN 15 087 651 143
  • Credit Union SA Ltd - ABN 36 087 651 232
  • Defence Bank Limited* - ABN 57 087 651 385
  • Hume Building Society Ltd - ABN 85 051 868 556
  • Hunter United Employees' Credit Union Limited - ABN 68 087 650 182
  • IMB Ltd - ABN 92 087 651 974
  • Members Equity Bank Pty Limited* - ABN 56 070 887 679
  • MyState Financial Limited* - ABN 89 067 729 195
  • Police Financial Services Limited - ABN 33 087 651 661
  • Railways Credit Union Limited - ABN 91 087 651 090
  • Teachers Mutual Bank Limited - ABN 30 087 650 459
  • The Police Department Employees' Credit Union Limited - ABN 95 087 650 799
  • Victoria Teachers Limited - ABN 44 087 651 769
  • Wyong Council Credit Union Ltd - ABN 29 087 650 897
  • * means the provider no longer offers new FHSAs.

External links[edit]

References[edit]

  1. ^ http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/index.html
  2. ^ http://www.ato.gov.au/individuals/content.asp?doc=/content/00250962.htm&page=2&H2
  3. ^ a b https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-individuals/Abolition-of-the-first-home-saver-accounts-(FHSA)-scheme
  4. ^ http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/s15.html
  5. ^ http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/s38.html
  6. ^ http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/s39.html
  7. ^ http://www.ato.gov.au/individuals/content.asp?doc=/content/00248470.htm&pc=001/002/066/002&mnu=&mfp=&st=&cy=1
  8. ^ "ATO's rates and threshold page.". rates and threshold. ATO. 2013-11-18 2. Retrieved 2013-11-18.  Check date values in: |date= (help)
  9. ^ http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/s32.html
  10. ^ a b http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/033.htm&pageID=003&min=wms&Year=&DocType=0
  11. ^ http://www.ato.gov.au/individuals/content.asp?doc=/content/00250962.htm&page=12&H12
  12. ^ http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=1886
  13. ^ a b http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;adv=yes;orderBy=priority,title;page=0;query=Dataset_Phrase%3A%22billhome%22%20ParliamentNumber%3A%2243%22%20tax%20laws%202011;rec=2;resCount=Default
  14. ^ http://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/r4519_first/toc_pdf/11021b01.pdf;fileType=application%2Fpdf
  15. ^ a b http://www.apra.gov.au/crossindustry/FHSA/Pages/default.aspx