SavingsGuide.com.au would like to take the opportunity to let everyone know that the Government has released some exceptionally good incentives for First Home Savers. As a result there has been a lot of talk about different First Home Saver accounts to the point that it has become very hard to find all the information you need + compare them to get the best option available.
This ‘Guide to First Home Saver Accounts‘ will help those wishing to find out the following;
- What is a first home saver account?
- What is the benefit of having a first home saver account?
- What is the catch to a first home saver account?
- Who offers first home saver accounts.
- Where to find further information on first home saver accounts.
and explain everything that is needed to be known about first home saver accounts in Australia.
What is a first home saver account?
As the name suggests, it is an account by which people looking to purchase a house can utilise to save money and receive a special rate of interest courtesy of the Australian Government. The Government will contribute 17 per cent on the first $5,000 (indexed) of individual contributions made each year.
The account balance cap of $75,000 has been introduced as of recently, meaning once that amount is achieved, the account will need to be used, or sit there until such time that the persons circumstances can purchase a house. Investment earnings (or interest) that accrue in the accounts will be taxed at 15 per cent, a great deal lower then that of other investment options. An added bonus also is that withdrawals will be tax free where they are used to purchase a first home to live in.
Benefits of a first home saver account?
Everyone is talking about this right? Well get some facts under your belt so that you can too! Here is a quick look at the benefits;
- Simple tax rate of 15%
- Government will contribute 17% of the first $5000 added to the account each year.
- The provider will also give you a high interest rate to help it grow.
- You will earn upto $850 from Government contributions per year.
What is the catch to a first home saver account?
There is no real catch, but you must remember that this isn’t your normal high interest account. This acount is to be used 100% for the sole purpose of saving for your first home.
If you don’t end up using the money for your first home, you will have to deposit the balance of the account into your superannuation account. The full amount must be withdrawn and the First Home Saver account closed at the time of purchasing a house or otherwise it will fall into that category. The money is treated like any other after-tax superannuation contribution. Individuals cannot open another First Home Saver account in the future after the first account has been closed.
In the event of death, divorce, disablement or severe financial hardship, First Home Saver accounts are generally treated the same as superannuation. In the event of bankruptcy, the balance is treated as though it were a normal savings account.
Eg; If you were to be given a house (by some extraordinary means!) you would have to close the account into you super account as soon as possible.
Who offers First Home Saver Accounts?
There are multiple providers of first home saver accounts, all of which would be classified as large financial institutions.