First home saver account

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

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

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

ATO's rates and threshold page:[8]

Income YearAccount balance capContribution thresholdMaximum 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

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

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

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

Abolition

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

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.

References
  1. http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/index.html
  2. "Archived copy". Archived from the original on 2011-03-30. Retrieved 2019-12-17.CS1 maint: archived copy as title (link)
  3. 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. "Archived copy". Archived from the original on 2010-09-19. Retrieved 2019-12-17.CS1 maint: archived copy as title (link)
  8. "ATO's rates and threshold page". rates and threshold. ATO. 2013-11-18. Archived from the original on 2013-11-06. Retrieved 2013-11-18.
  9. http://www.austlii.edu.au/au/legis/cth/consol_act/fhsaa2008273/s32.html
  10. "Archived copy". Archived from the original on 2010-09-10. Retrieved 2019-12-17.CS1 maint: archived copy as title (link)
  11. "Archived copy". Archived from the original on 2011-03-30. Retrieved 2019-12-17.CS1 maint: archived copy as title (link)
  12. "Archived copy". Archived from the original on 2010-12-06. Retrieved 2010-10-06.CS1 maint: archived copy as title (link)
  13. 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. http://www.apra.gov.au/crossindustry/FHSA/Pages/default.aspx
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