Overview
First home saver accounts offer a tax-effective way of saving for your first home through a combination of government contributions and low taxes.
They're a special purpose account that is more like a term deposit than a normal, everyday account because you have to keep the money there for a minimum period of time. Once that time has passed and you make the decision to buy or build your first home, you have to withdraw all the money at once and close the account. You need to use the money you save as a deposit or to meet other costs you incur in buying or building your first home.
Benefits
There are several good reasons to open a first home saver account. The more money you save, the more the government will contribute - up to a certain limit each year, and there's also a tax incentive to save money for your home because earnings are taxed at 15%.
Eligibility
You need to understand the separate rules for eligibility to:
- open an account
- make contributions
- receive the government contribution
- access your funds.
Opening an account
Not all first home saver accounts are the same. Choose the account provider you want to have your account with and read their product disclosure statement to find out more. Banks, building societies, credit unions, life-insurance companies, friendly societies and trustees of public-offer super funds can all offer first home saver accounts.
Building your account
Once you've opened an account, you can make personal contributions. Other people (such as your parents or other family members) can also help you out by contributing to your account.
The government will make a contribution equal to 17% of your personal contributions for the financial year, up to a maximum amount each year.
Closing your account
To withdraw your funds, you need to meet a condition for release and you can't just withdraw some of your money - you must withdraw the full amount and close the account.
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If you change your mind about buying a home, you cannot simply close your account, withdraw your funds and spend the money. You must close your account and transfer the balance to your superannuation (unless you are aged 60 or over in which case the balance can be transferred directly to you) and you cannot ever open another first home saver account.
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Last Modified: Tuesday, 23 August 2011