The First Home Saver Account Scheme (FHSA)

The First Home Saver Account Scheme (FHSA) is a fantastic new initiative from the Australian federal government that aims to help aspiring first home buyers save a larger deposit faster. First Home Saver Accounts will work in a similar style to superannuation schemes by offering tax breaks and higher returns.

A First Home Saver Account will differ from an ordinary savings account in the following ways:

• First Home Savers will be eligible for a low tax rate of 15 per cent on the first $5000 of income they deposit in their account each year - rather than the ordinary tax rate (the individual’s relevant income tax rate)
• Interest earned will be taxed at 15 per cent or less.

Contribution arrangements

Individual contributions of up to $10,000 (indexed) may be made into a first home saver account each year. These contributions may be made by the account holder or another party, such as an employer, on behalf of the account holder. Contributions have to be made from after-tax income.

• The Government will make an additional contribution which will be paid directly into the account, with arrangements broadly reflecting those for superannuation.
• The Government contribution will be made on up to $5,000 of individual contributions each year.
• The contribution level will be either 15 per cent, or the account holder's marginal income tax rate less 15 per cent, whichever is greater.

Individuals with incomes of up to $80,000 who contribute $5,000 to their account will receive a Government contribution of $750.

For individuals on incomes above $80,000, the contribution will vary depending on the marginal income tax rate of the individual.

Although it typically takes first homebuyers an average of five years to save an adequate home deposit, the First Home Saver Accounts allow for savings to be withdrawn after four years to provide a reasonable degree of flexibility in the ever changing property market.

Withdrawals from First Home Saver Accounts will only be permitted for the purchase of an eligible first home and will be tax-free.

Am I eligible for a First Home Saver Account?

An individual can open a First Home Saver Account if they:

• are aged 18 or over and under 65;
• are an Australian resident for taxation purposes;
• have not previously purchased or built a first home in Australia to live in;
• do not have or have not previously had an account; and
• make an initial contribution of at least $1,000.

One of the greatest obstacles to buying a first home is saving a deposit; the First Home Saver Account Scheme overcomes this and brings you much closer to your dream – owning your own home.

Tridential can provide you with an overview of the First Home Saver Account Scheme and help you understand what your home loan options are as well as set up your savings scheme with the right bank for you.