Do I want to do that? These accounts weren't very popular when they were introduced in 2008, mostly because they were very inflexible. But changes made by the government have prompted more first-home buyers to consider using them. Figures from the Australian Prudential Regulation Authority showed 31,000 accounts had been opened by June, holding savings of $230 million.
That's a 56 per cent improvement on March and up 95 per cent from September last year.
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The scheme attracted more than 6000 account holders in the first six months of this year.So how does it work? As the name suggests, these are special accounts only open to people saving for their first home.
They have two main benefits. First, any interest you earn on the account is only taxed at 15 per cent, so if you earn more than $37,000 you'll save at least half the tax you would have paid on a normal savings account.
To encourage you to save, the government will also kick in 17 per cent of any deposits you make up to $5500 a year. So if you deposit the full $5500 in one financial year, you'll receive another $935 from the government. Both amounts are indexed.
Sounds great. What's the catch? You'll have to meet a number of conditions. First, you have to put away at least $1000 each year for four financial years before you can get your money out.
These four years don't have to be consecutive and you could get your money back after two years and two days if you opened the account on June 30 and closed it on July 1 but it still means locking your money up for the medium term.
Once your account balance hits $85,000 (indexed) you can't make any more contributions, though interest will still be credited to your account. And the money has to be used for your first home. You can't change your mind and withdraw it to head off overseas or buy a new car. If you don't buy a home, the savings will be added to your super where they will remain until you retire.
Partial withdrawals are also not allowed; you must withdraw the full amount and close your account.
The house must be your principal place of residence, not an investment property. To meet the requirements you have to live in it continuously for at least six months within a year of settlement on the property or, if you're building, construction being completed. On the other hand, if you already own an investment property you can still open a First Home Saver Account, so long as you have never lived in it.
What if I want to buy my house before the four years are up? That was one of the sticking points with the original scheme. The government now allows you to have your account balance paid into your mortgage when the four years are up rather than having to wait to buy or having the money transferred into super. But you'll still have to find the money from elsewhere to fund your deposit. You also have to notify your account provider within 30 days of buying the house.
What if I'm buying a house with someone else? The good news is you're both eligible (assuming neither of you have owned a house before) to open an account. That effectively doubles the value of the potential government contributions. If you buy a house together, it also means that when one of you has met the four-year savings mark, you can both take your money out to fund the purchase.
Can my parents contribute to the account? Yes, there is no requirement that the savings have to be all your own. Contributions from other people are also eligible for the government's 17 per cent, up to the total $5500 limit.
More information is available from the Australian Tax Office.
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