First Home Saver Account

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.