June 28, 2011
Changes to the First Home Saver Accounts (FHSA) Act will make saving for a deposit much easier.
FHSAs were introduced in October 2008 to encourage saving by granting first homebuyers tax concessions and government contributions.
The accounts operate for four financial years, during which time the account holder must deposit a minimum of $1000 per year to be eligible for a 17 percent government contribution on the first $5500, deposited per year.The accounts’ earnings are taxed at a reduced rate of 15 percent.
Prior to the overhaul, however, if the account holder bought a home before the mandatory four years was up, the money was automatically transferred into a superannuation account.
Under the new, more flexible system, the money in the FHSA can now be applied to a first home loan even if the four-year term has not been completed.
Terms and conditions:
- Money can only be released from the FHSA for the purchase of a new or existing home.
- Money must be withdrawn in full and the account closed.
- No tax is paid on the funds withdrawn.
- Account holders must save a minimum $1000 per year for four years before the money will be released but those years do not need to be consecutive.
- If you do not wish to use the money to buy a home and are under the age of 60, the funds will be allocated to your super fund, and you are not permitted to open another FHSA.
- The maximum amount allowed in an FHSA is $80,000. The money is indexed but does not have be declared to the tax office.
- Accounts can only be opened by individuals, so couples looking to purchase a home jointly need to open two separate accounts. You can withdraw from both accounts as soon as one of them reaches the four-year term.
- The scheme is not available to anyone who has previously owned property in Australia.
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