Contribution Arrangements

Tax on Accounts

Things to keep in mind

You must contribute at least $1,000 in at least four separate financial years before you can withdraw your funds. You must use your fund to purchase or build a new home. Otherwise you can switch the entire amount into your superannuation fund.

For advice on whether opening a Government first time buyer savings account is the way for you, contact your local Home Loan Office broker who can talk you about your options.

To find out Answers to Frequently Asked Questions, you can also visit the Government’s website FHSA FAQs

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FACT SHEETS

FACT SHEET - First Home Owners Grant & Duty Concessions

FACT SHEET - First Home Saver Accounts

FACT SHEET - Deposit Bonds

FACT SHEET - Loan Establishment Costs

FACT SHEET - Frequently Asked Questions

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FIRST HOME BUYER NEWS

Smaller banks 'offer better' first home saver accounts
Source: ABC News
Wed Oct 1, 2008 12:45pm AEST

Consumer group Choice has released a report which compares the terms and conditions banks are offering under the Federal Government's First Home Saver Accounts scheme, which officially starts today.

The scheme aims to help prospective homebuyers save for their first house through a combination of government co-contributions and low taxes.

Choice spokesman Christopher Zinn says the survey ranks the different deals on offer and shows some have better interest rates and lower fees than others. "We found that in terms of our benchmarks, it's smaller banks and some of the credit unions that actually offer the better saver accounts," he said. "Whereas Commonwealth Bank it's interest rate is currently below the Reserve Bank's cash rate and the way they calculate interest and credit isn't actually always in the consumers best interest."

To read more, please visit ABC NEWS.

First home saver accounts available
Source: SMH
October 1, 2008 - 12:33PM

Financial institutions on Wednesday began offering savings accounts for first home buyers eligible for a federal government cash handout of up to $850 a year. The first home saver accounts are available at major institutions across the country, including ANZ, Commonwealth Bank, AMP, Members Equity and several credit unions. However, consumer group Choice warns potential savers that not all the accounts are the same and that interest rates offered vary. The government will provide a 17 per cent contribution - or $850 - on the first $5,000 of individual contributions made each year.

Housing Minister Tanya Plibersek said the government is investing $1.2 billion to help young people save for their first homes through these accounts. "The biggest barrier to home ownership is saving a deposit and first home saver accounts will bring the dream of home ownership closer for hundreds of thousands of Australians," Ms Plibersek said. "First home saver accounts are a practical way for young people to save a bigger deposit for a modest first home."

The deal also offers a low tax rate of 15 per cent - the equivalent of superannuation accounts. This means a couple both earning average incomes, putting 10 per cent of their income in the new accounts, will be able to save more than $88,000 after five years depending on interest rate returns. This is almost $13,000 more than they would have saved in a standard variable savings account.

However, Choice has discovered not all of these accounts are created equal. "Consumers need to be aware that not only do interest rates on offer differ but the way interest is calculated can make a big difference to the final deposit that's saved," Choice spokesman Christopher Zinn said. "For example, ANZ pays 6.99 per cent interest in months when regular savers make a deposit, but in other months accounts earn just 0.01 per cent." Mr Zinn said the Commonwealth Bank's interest rate is also currently below the Reserve Bank of Australia's cash rate and interest is credited annually instead of the preferred monthly or quarterly regime. Also, some accounts may penalise consumers who want to switch to a different account provider with an exit fee. Choice's pick of institutions so far - based on a benchmark that takes into account the interest rate, account keeping and exit fees, fair and simple interest rate calculations and minimum deposit requirement - are AMP Bank and the two teachers credit unions of NSW and Victoria.

The federal Treasury estimates that around $6.5 billion will be held in first home saver accounts after four years with a take-up of 730,000 accounts. Ms Plibersek said the accounts will be open for those aged between 18 and 65, but family members can also contribute. "One of the greatest hopes for Australian parents and grandparents is to see their children and grandchildren well settled in a home of their own," she said.

To read more, please visit SMH.

Banks shun first-home savings accounts
Source: news.com.au
By Alex Tilbury September 12, 2008 12:00am

THE Rudd Government's great hope to overcome the housing affordability crisis by offering first-home buyers' beefed-up savings accounts looks set to be a huge fizzer. The silence is deafening from the finance sector, just two weeks out from the October 1 deadline when the accounts were set to hit the market.

Of almost 200 banks, credit unions and building societies in Australia, just 14 obscure outlets -- mostly close to teachers, police and those in the Cypriot community -- have expressed any interest with the banking regulator regarding the accounts.

Life insurers and super funds can also offer them and so far the Labour Union Retirement Co-operative Fund is the first to show any interest. The Federal Government has allocated $1.2 billion to help set them up, including $150 million over the next four years to improve the accounts.

Fiona Reynolds, chief executive of the Australian Institute of Superannuation Trustees, said many super funds had put the first-home saver accounts "in the too hard basket". "These products are welcome but, under the proposed legislation, the costs of establishing and running a FHSA are simply too high for many super funds."

The accounts were first lauded in February and later in the May Budget by Treasurer Wayne Swan as a great saviour to help new buyers get on to the property ladder. If used to their fullest, savers could receive $3400 free from the Government after four years or $6800 if a couple opened separate accounts.

Infochoice spokesman Steven Anderson said there had not been a peep out of any major banks regarding these new products because they have been deemed too expensive and complex.

Finance industry sources said the accounts had to be created using a trust structure, similar to superannuation, and the Government's reporting was too onerous and complicated. But Mr Swan's spokesman was adamant "a few banks and various other institutions are going to offer the accounts" from October 1, but he declined to name any.

Opposition housing spokeswoman Sussan Ley told The Courier-Mail people now didn't have to have $1000 to open an account. "I think it smacks of desperation by the Government that they've had to lower the threshold," she said.

Main points

• Deal capped at $3400 over four years.
• No minimum deposit but maximum $75,000 balance.
• Government to pay first-home savers 17 per cent on after-tax deposits up to $5000 or $850 a year.
• Open to 18 to 65-year-olds.
• Money only to be used for owner-occupied houses or rolled into super.

To read more, please visit News Limited.