First Home Saver Account

Options for Saving for First Home Saver

admin — Mon, 01 Mar 2010 10:39:28 +0000

With an intention to help the young Australians aged 18 and above, the First Home Saver Accounts (FHSA) was announced as confirmed in February, 2008.

The Savior Program:

The major intention of providing the FHSA program for the individuals was to help Australians to save for their first home and provide ample contributions as well as support from the part of the government. This is a simple and quite a tax effective program aimed to help individuals to set up their first home without much difficulties. The program requires the individual to qualify on following grounds to be able to enroll in it:

Ø The individual needs to fall within the age criteria of 18 to 65.

Ø This purchase of a house is the first one they plan to live in.

Ø This is the first time they are availing this facility.

Ø They should be able to provide their tax file number to the authorities concerned.

The government charges a penalty to those people who open an FHSA account without proper qualifications.

Savings for the first home:

Allowing the first time home buyers to unlock higher returns, the FHSA has been improved over time to help members with refined equity, improved accessibility and reduced administrative costs as well. The program allows providing a low tax environment for such savings account and savings of up to $5,000 per year (indexed) is eligible for contribution from government as well.

The way with term deposits:

There is a four years savings horizon fixed by the First Home Saver Accounts program. As per this, the individual needs to make a minimum contribution of $1,000 over the course of at least four financial years. Only then can such an individual qualify to make withdrawals without tax burden. Also if such individual is jointly purchasing a property and if the other person also is availing FHSA, then only one of them needs to actually meet this term deposit qualification. Contributions to such account can be made by the individual or by another party as well but only from the after-tax income. This other party could be even the account holder’s employer as well. Once the individual submits all relevant details to the ATO and files his tax returns, the government’s contribution will be directly credited to their FHSA account.

The Good part of FHSA:

The main intention of opening up an FHSA for an individual is to help them manage their cash funds better. This program that allows for better incentives will allow the individual to claim up to 15%-30% of contribution from the government on his savings in this account. Also such contribution will depend upon the marginal income tax rate applicable on the income of the account holder. Such contribution is available on up to $5,000 post tax contributions by the individual into such FHSA each financial year.

The FHSA program thus offers you a better way to save a deposit for your first home. The aspiring first home buyers can now benefit largely from such account regardless of their marginal income tax rate since such contributions and friendly tax policies inspire individuals to go for their first huge investment for their lifetime.

First Home Saver Account and Government Regulations

admin — Sat, 20 Feb 2010 06:26:09 +0000

First Home Saver Accounts (FHSA) was designed by the Federal government to help the youth of Australia to purchase or build their own first home. Leading them with a hand, this program can have marvelous effects in the future with regard to home ownership. The program was launched in October, 2008 and later on revised to incorporate better regulations as per the popular demand.

The Uncertainty Remains:

The worst part of any new programs implemented by the government is the associated risk with changes in its rules. This program that was a result of the 2007 federal elections commitment received around 150 submissions from individuals, businesses and organizations as well. In line with such submissions, the regulations have been changed to make the program simpler and easily accessible for others. However more consultations are still in place and this means that the risk still exists over further changes in the policy. This uncertainty can be at times difficult for the account holders since their future hangs in mayhem.

Tax Position perplexities:

It is true the FHSA program has helped to simplify the tax burden for the first time home buyers. Yet one needs to be an Australian resident and possess a tax file number (TFN) in order to avail such facility. Also the arrangements for taxing account providers will vary depending upon the type of provider.

The Ups and Downs of FHSA rules:

Estimates show that a large population of Australians is still homeless and this program is an effort to curb this problem. Yet the rules of the program do not make it clear whether it will actually serve that purpose. This is because the program is beneficial for mainly those who are able to save well. As the contributions by the government is directly linked to how much the account holder is able to save over the financial years to come, this program will benefit more for the people who are able to save more. This means that the program will indirectly benefit the top income level more than the lower income people.

The implications of Henry tax review:

Ken Henry tax review looks at the future taxation system in Australia and recommends several tax effective savings accounts systems. The review focuses mainly on household income and puts light on how superannuation, investment property, salaries, bank deposits, shares etc. are taxed quite differently. This new tax review has the potential to make a meaningful difference in the life of everyone in the country.

With regard to housing affordability, the Henry tax review recommends to provide First Home Saver Accounts as a choice of fund. In other words, the review recommends providing the FHSA as a valid alternative to the Superannuation Choice of Funds. Once the FHSA has been closed, the account holder can simply resume superannuation contributions for retirement purposes. What this will do is to simplify the taxation procedure since the taxation used for superannuation fund and FHSA is similar. Also these measures can help overcome various problems associated with home ownership and retirement savings like reduction in future age pension outlays etc.

First Home Deposit Saver Account

admin — Thu, 21 Jan 2010 11:19:14 +0000

The First Home Deposit Saver Account has been introduced by the federal government so as to help the first home aspirants to make their dreams come true. This is a wonderful opportunity for the first time home buyers to save a deposit using this simple, tax effective program. It is true that in today’s recession times, the housing problems are becoming even worse. The government has taken a step forward by providing contributions to this account and all interest that accrues to the same account is taxed at a very low rate.

When to go for FHSA:

If you are saving up all your money to buy a house for you to live in at Australia for the first time and if you are able to save at least $1,000 every year for four different financial years, then you can avail the FHSA program. For this you need to be aged either 18 years or above and yet not above 65. In addition you should also be able to provide your tax file number as well. Make sure that when you apply for FHSA, you have never availed of this facility before and that you do not have another property in Australia that you have purchased or built for the purpose of housing. If you are going to make this house along with savings of others, then you need to separately open up your own FHSA.

First Home Owners Grant:

The first home owners grant is a completely different scheme from the first home saver account program. The conditions that exist for each of these programs are completely different and hence you need to apply for each of them separately. Those who are eligible can qualify for as much as a $7,000 first home owner’s grant in addition to availing the FHSA program benefits.

FHSA helps first home buyer save a deposit

The government will contribute around 17% of the first $5,000 contributed annually to the account. The overall account balance cap is fixed at $75,000. This program helps you to save a deposit and the highlights of the FHSA with regard to your deposit savings are:

Ø You can deposit as much money as you like into this account.

Ø You can only deposit or save your after-tax money.

Ø You are required to save at the least $1,000 per financial year and for four financial years minimum. These four financial years need not be in a row.

Ø You can keep on saving in your FHSA account till the amount reaches the account balance cap. Once the account reaches the maximum cap amount, you can only keep on adding government contributions and interest credited to such savings.

Ø You can choose to use this account either till you buy your first home or till you reach the age of 65.

This program is intended to help first time home buyers to succeed in their efforts. The recent consultations have helped to deliver an enhanced FHSA that makes the whole program fairer and simpler as well.

Closing or withdrawing FHSA

admin — Sat, 03 Oct 2009 13:23:19 +0000

You can withdraw your investment from your first home saver account after you have selected a home or a land to purchase. All your saving must be withdrawn before the selection of the land and completion of the construction as you can not withdraw the amount after completion of the construction of the home. Your home must be located in Australia and you must stay in the home for six months after the completion of the construction of your home. You can use the money withdrawn from the first home saver account within the six months of the withdrawal. You can use the money to fulfill variety of costs such as to the pay the deposit of the home or the land on which the home is built. You can spend the money on the legal fees and stamp duty. You can pay the council fee and finance approval fee with the help of this money.

You are free to open another first home saver account if the purchase of your home falls through. You are not penalized in any case if the situation was beyond your control or the circumstances were not foreseeable.

You can change your mind within the cooling off period that is 14 days after opening the first home saver account. You can withdraw your saving with closing your account. However, after cooling off period you can withdraw your amount directly. You have to shift your amount to the super fund and it will invest in that until you retire.

If in any case you move abroad you can keep running your first home saver account however you can not receive the government contributions over your savings.

Four Financial Year Rule for First Home Saver Account

admin — Fri, 18 Sep 2009 11:54:54 +0000

You can not withdraw your saving from First Home Saver Account unless you kept at least $1000 per year for four financial years in your account. This means you have to save almost $20 per week to fulfill this four year rule of the first home saver account. An individual can open a First Home Saver Account only for himself as you can not keep a joint first home saver account. Your relatives, parents and family members can deposit any amount on your behalf but you can not operate a joint account as par rules. If two individuals are saving amount for a single common house they will open separate accounts and will receive separate Government contribution in individual accounts.

Types of First Home Saver Account (FHSA)

admin — Fri, 03 Jul 2009 11:43:19 +0000

A number of financial institutions like banks and credit unions are offering different types of first home save accounts. The first home saver accounts offered by banks, credit unions and building societies are called deposit style accounts where as the accounts offered by super funds and insurance companies are called market-linked investment accounts.

Deposit Accounts

These are the common type of investment accounts and the saving depends upon what you put in these accounts. A varied interest rate is offered by the different financial institutions.

Investment Accounts

In investment accounts your savings can be invested in share markets, property, cash and fixed interest products and things like that. You can expect a better return on your saving in investment accounts however your return rate can boost up and may decline depending upon the market situation and fluctuations. Fees can be implied on your First Home Saver Account like the account keeping fees, entry and contribution fees, exit fees which is deducted when you quit your account or move it to the other financial institution. Management fees including commissions.

If you decide to move your first home saver account to some other institution with better return rate you can ask the new institution to arrange the transfer of funds to the new account by closing the old first home save account.

How to decide the right First Home Saver Account (FHSA)

admin — Thu, 18 Jun 2009 12:42:42 +0000

There are a number of packages offering a number of options in your First Home Saver Account. However, you must choose the account if and only if it suits your requirement. The First Home Saver Account will only suits you if you want to purchase a home at least four year after opening the First Home Saver Account. As you can not withdraw money before four financial years so first home saver account does not suits you if you are able to purchase a home before completion of four years. You can not use your investment of First Home Save Account else where as the only purpose of this account and saving is to purchase a home with these investments. You can not spend your money on travel other entertainment packages if you have deposited it in the first home saver account. If you have got another option where you can get more return on your savings or you can receive more money than the Government contributions, the First Home Saver Account is not a feasible option for you in such circumstances.

First Home Saver Accounts Principle

admin — Fri, 12 Jun 2009 12:09:35 +0000

First home saver accounts are offered by many banks and credit unions in assisting under age people to save money for the purchase of their first home. With the help of first home saver accounts you can boost up your savings to buy your first home ever. With a combination of low taxes and Government contributions First Home Saver Account make you able to save money for your first home. With the help of First Home Saver Account your saving will attract the Government contributions and you will be offered lower rate taxes on your earnings and interests. However you can use the funds saved in the First Home Saver Account solely for purchasing the home. You can not use these funds and savings on other ordinary purposes. You have to save the money and keep the investment for the four financial years and after that you can use this investment to purchase or build the home in which you will live.

An amount of 17% of your saving or investment will be added by the Government to your First Home Saver Account in each financial year. However, the amount of your saving or investment must be up to $5000 or more than that. If you have a saving of $5000 in your account Government will add $850 to top up your saving each financial year. Another excellent feature offered by the First Home Save Account is that they offer interest on your earnings and investment. The tax rate will be quite low on your interest or earnings. The tax rate applied by the Government will be only 15%.

Before introducing the first home saver accounts the Government asks for the suggestions, comments and consultation from the community. Government received almost 150 submissions from various businessmen, organizations and other people and decided an overall account balance of $75000 with no upfront contribution. Government also offered tax incentives to the owners of the First Home Saver Account as explained above.

These First Home Saver Accounts are the real help for thousands and hundreds of people out there who face difficulties in building or purchasing their own home due to lack of finances. It’s a practical way to help individuals to save money for their first modest home. As Government offers its own contribution along with the reduced tax rate First Home Saver Account helps individuals to deposit the amount for purchasing first home in a short period of time. Other than the routine mark up of 17% Government also offers $170 for every $1000 up to maximum bonus of $850.

How to Save in First Home Saver Account

admin — Thu, 28 May 2009 12:34:27 +0000

After opening a First Home Saver Account you can deposit the amount in your account instantly. You have to keep your savings and investment in your account at least for four financial years. However it’s not compulsory that these four years must be in a row. The amount balance cap for the First Home Saver Account is $75,000.

You can invest and save your money until it reaches the balance cap. After you achieve the balance cap only outstanding Government contributions may be added to your account. Your account remains operating until you purchase a home or you turn sixty five year of age.

Eligibility Criteria for FHSA

admin — Thu, 28 May 2009 12:28:57 +0000

An account opener may be called as eligible for the First Home Saver Account if he or she is above eighteen years or less than sixty five years of age. The person interested in the First Home Saver Account must be an Australian Nationalist for taxation purposes. He must be going to buy the first home to live in Australia. This means he must not be the owner of any home in Australia before purchasing a home through First Home Saver Account.

You must not have a First Home Saver Account before opening another account. An individual can have only one First Home Saver Account. You can face penalties if you try to open a First Home Saver Account and you are not eligible for that.