Thursday, May 15, 2014

What should a First Home Saver Account Holder do?

This week's federal budget has landed a quiet blow to the 46,000 people who have opened up a First Home Saver Account, but the news is not all bad. Whilst the program will be wound up, one advantage is that all 42,000 account holders will be able to withdraw their savings at the end of the next financial year without having to buy a house to withdraw the money.

The FHSA were supposed to help hundreds of thousands of first homebuyers when it was launched in 2008 with a prediction that over $4 billion dollars will be held in those accounts by this time but only $521 million sit in the 46,000 accounts with an average of $11,000 in each account.

If you have a current FHSA, our understanding is that the 17% government co-contribution will continue for all deposits up to $6,000 in the 2013/14 financial year. That means if you haven't put in any money into your FHSA this year because you were not sure whether you would be able to get the money out, it may be a good idea to make the most of the $1,020 co-contribution still available if you transfer $6,000 into your FHSA. Even if you don't get the co-contribution, your interest earned in that account still gets only taxed at 15% and you can get the money out at the end of next financial year.

This is from the ATO website

Abolition of the first home saver accounts (FHSA) scheme

In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme;
  • 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.
  • 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.
  • 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.
  • Restrictions on withdrawals will be removed from 1 July 2015.
Once the first home saver account scheme is abolished from 1 July 2015, these accounts will be treated like any other account held with a provider.
The existing rules will continue to apply until the law is changed.

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