Options for Saving for First Home Saver

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.