First home saver account

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I have one open at the moment with around $7K in it and which effectively vests mid next year. Handy, as the Fed. Government chips in $4K over the life of the account and especially given that all other incentives for first home buyers to buy are going or gone.

Key is to open one just before the end of a financial year, thus reducing the potential time from up to four year to effectively just two. The other things is to put in only just enough to get the full government contribution and to park any other savings elsewhere for a higher rate.

Downsides mainly are that you cannot access the funds, even to buy a house, prior to the expiry of the four financial year period (although you can buy and have the money go toward the morgage at the end of the term).

I guess it really depends on whether you have the patience to save and how determined you are to buy property in Australia over the short to medium term. I probably wouldn't count on house prices doing a great deal over the next couple of years at least.
 
Just opening one now myself.. Been doing a fair bit of WPing on the subject, like Smell The Glove said, you need to have patience..

But if you do go through with it, you get a guaranteed interest rate way above anything else (non-risky)!

For the first 6k (indexed each year), the government contributes 17% interest (even if its only sitting there for one day, that being June 30th), plus the compounding regular saving interest, but attractively, at only 15% tax (capped).

And while the 4 year rule seems scary, if you time it right, it realistically only needs to sit ther for 2 years an 2 days before accessible.

How I figure it, is that either way I want to save money over the next few years, AND I want to buy a house in the next few years (not yet n financial position). This account is the perfect way to achieve this.

Another good thing is that, even though you can only have the first 6k contributed to, if your partner can open up an account, and its completely acceptable to "contribute" to that account (effectively allowing you to have up to 12k a year earn 17% interest).

Finally, as it must be used on your first home, you are completely entitled to purchase investment property in the meantime, as long as you don't actually go and live in it.

All in all, sounds like a pretty good thing if you can make it work for you..
 

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Well it look like my timing is good.
4 year plan. I would think I would want to be purchasing a house in the next 1-2 years - what would be the issue with this ?

What financial instituation are you's using for the account ?
 
It would depend on what your financials are like when you go to buy the house..

If you can wait 2 years plus a month, then it would make sense to start saving this way now, or if you can afford a deposit before the 2 years and 2 days is up..

You are allowed to buy before the money is accessible, but you obviously have to wait to have access to it. Once you do, it can be put towards paying off an mortgage (or even reno's I believe)..

There's a list floating around somewhere on whirlpool (first page of the first home saver thread)- best option would be one of the union type funds- ie police fund or railway worker fund..

Unfortunately, I have no links to any of those, so took what looks the next best option through ME Bank..
Most of the main banks use to offer it, but supposedly the demand wasn't there (young people don't have the patience/foresight any more?) lol
 
I have the deposit saved already. I would look to be building in the next 1-2. What value would be best to start with? No use going over the capped amount. Currently accruing interest with Bankwest eSaver only.
 
ptrg said:
Another good thing is that, even though you can only have the first 6k contributed to, if your partner can open up an account, and its completely acceptable to "contribute" to that account (effectively allowing you to have up to 12k a year earn 17% interest).
Click to expand...

thanks for the tip, i've been looking at these accounts and was unaware of this.
So i presume the 4ishk gov contribution over 4 years doubles also in this instance too?

Not explicitly clear from the website:

Can I set up a joint FHSA account with my partner?No, an account needs to be set up as an individual account, so each partner must have their own First Home Saver account. But you can make contributions to your partner’s First Home Saver account.
If my partner and I both open separate First Home Saver accounts, can we buy a house together?
Yes, you can use your First Home Saver accounts to buy a joint property, and in this case only one account holder needs to satisfy the four year rule (saving a minimum $1,000 in each of four separate financial years).
 
ptrg said:
Just opening one now myself.. Been doing a fair bit of WPing on the subject, like Smell The Glove said, you need to have patience..

But if you do go through with it, you get a guaranteed interest rate way above anything else (non-risky)!

For the first 6k (indexed each year), the government contributes 17% interest (even if its only sitting there for one day, that being June 30th), plus the compounding regular saving interest, but attractively, at only 15% tax (capped).

And while the 4 year rule seems scary, if you time it right, it realistically only needs to sit ther for 2 years an 2 days before accessible.

How I figure it, is that either way I want to save money over the next few years, AND I want to buy a house in the next few years (not yet n financial position). This account is the perfect way to achieve this.

Another good thing is that, even though you can only have the first 6k contributed to, if your partner can open up an account, and its completely acceptable to "contribute" to that account (effectively allowing you to have up to 12k a year earn 17% interest).

Finally, as it must be used on your first home, you are completely entitled to purchase investment property in the meantime, as long as you don't actually go and live in it.

All in all, sounds like a pretty good thing if you can make it work for you..
Click to expand...

For anyone who read the above post, in particular the bolded bit, the government does not pay 17% interest, they pay a co-contribution equivalent to 17% of your contributions to the account for that year and paid into the account a few weeks after you do your tax return for a given year.

I have an account, so don't get me wrong I like the idea, but there are some circumstances in which a FHSA is much worse than a regular online saver account. For example:

1. If you are a low income earner, 15% tax on earnings may not be attractive.
2. The interest rate that the banks are paying for FHSA's is quite low - I am with mebank who have been historically pretty generous with their rates and they are only giving 3.5%. Ubank is paying 4.66% at the moment.
3. In relation to point 2, the low interest rate can outweigh the government contribution if you have a large amount in the account and/or don't make a large contribution in a given year.

i.e.

$50,000 sitting in a mebank FHSA account with $1,040 ($20 per week) put in over a year
* End balance = $54,295 plus $170 from the government = $54,465 gross, $54,054.75 net

$50,000 sitting in a ubank regular account with $1,040 ($20 per week) put in over a year

* End balance = $55,233 gross (net will depend on your tax bracket)

If you are a low income earner, that is in a 0% tax bracket, then the gap between the two options is over $1,000.

I think the set 15% tax rate is a serious problem with the program as a lot of the people this might be attractive to (university students and high school students with part time jobs etc) might be disadvantaged by what is supposed to be an incentive.
 
Rancid_Beasties said:
For anyone who read the above post, in particular the bolded bit, the government does not pay 17% interest, they pay a co-contribution equivalent to 17% of your contributions to the account for that year and paid into the account a few weeks after you do your tax return for a given year.

I have an account, so don't get me wrong I like the idea, but there are some circumstances in which a FHSA is much worse than a regular online saver account. For example:

1. If you are a low income earner, 15% tax on earnings may not be attractive.
2. The interest rate that the banks are paying for FHSA's is quite low - I am with mebank who have been historically pretty generous with their rates and they are only giving 3.5%. Ubank is paying 4.66% at the moment.
3. In relation to point 2, the low interest rate can outweigh the government contribution if you have a large amount in the account and/or don't make a large contribution in a given year.

i.e.

$50,000 sitting in a mebank FHSA account with $1,040 ($20 per week) put in over a year
* End balance = $54,295 plus $170 from the government = $54,465 gross, $54,054.75 net

$50,000 sitting in a ubank regular account with $1,040 ($20 per week) put in over a year

* End balance = $55,233 gross (net will depend on your tax bracket)

If you are a low income earner, that is in a 0% tax bracket, then the gap between the two options is over $1,000.

I think the set 15% tax rate is a serious problem with the program as a lot of the people this might be attractive to (university students and high school students with part time jobs etc) might be disadvantaged by what is supposed to be an incentive.
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Why would anyone plonk 50k in this account?
If you use it correctly you work out a lot better off than a regular savings account.

Eg. Put 6k in a week before the deadline each FY and you are approx $3800 better off. The rest goes in a term deposit or high interest savings account.
Only need to have it going for 2 years and 2 days and you're sweet.
 
dale_mighty_pies said:
Why would anyone plonk 50k in this account?
If you use it correctly you work out a lot better off than a regular savings account.

Eg. Put 6k in a week before the deadline each FY and you are approx $3800 better off. The rest goes in a term deposit or high interest savings account.
Only need to have it going for 2 years and 2 days and you're sweet.
Click to expand...
I think you might have missed my point. Nobody would plonk $50k in the account, but its possible that if you made the max contributions each year since the start of the program your balance could be getting pretty close.

It was just a figure I plucked out to demonstrate that the scheme has positives and negatives.

I could have picked any figure above about $13,000 as the base amount (instead of $50k) with $20 per week contributions, and the fhsa works out to be the worse option for a given year. Yes, to get the to $13,000 you might have enjoyed co-contributions. My point is that to work out if the scheme is beneficial to you or not you really need to look at all of the aspects of it (not just the pros) and the benefits derived over the course of your money being in there.
 

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Rancid_Beasties said:
I think you might have missed my point. Nobody would plonk $50k in the account, but its possible that if you made the max contributions each year since the start of the program your balance could be getting pretty close.

It was just a figure I plucked out to demonstrate that the scheme has positives and negatives.

I could have picked any figure above about $13,000 as the base amount (instead of $50k) with $20 per week contributions, and the fhsa works out to be the worse option for a given year. Yes, to get the to $13,000 you might have enjoyed co-contributions. My point is that to work out if the scheme is beneficial to you or not you really need to look at all of the aspects of it (not just the pros) and the benefits derived over the course of your money being in there.
Click to expand...

Please show me a scenario where a person puts in the 6k a year and is worse off?
 
dale_mighty_pies said:
Please show me a scenario where a person puts in the 6k a year and is worse off?
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Joe Bloggs don't end up saving as much because not all his savings are locked away.
A legitimate scenario.... and certainly one worth considering for those who would find it difficult being disciplined.

Not forgetting that one of the major benefits of a mortgage (over renting) is enforced savings/investment.
Especially for those who struggle putting away money and keeping it put away.
 
The_Steadier said:
Joe Bloggs don't end up saving as much because not all his savings are locked away.
A legitimate scenario.... and certainly one worth considering for those who would find it difficult being disciplined.

Not forgetting that one of the major benefits of a mortgage (over renting) is enforced savings/investment.
Especially for those who struggle putting away money and keeping it put away.
Click to expand...

Fair enough. There are scenario's where you'd be better off going for a regular savings account i do agree with you, but for anyone who is a disciplined saver, you can't go past the 17% govt contribution.

Is anyone opening an account before July 1?
 
I've had mine open for three financial years now. I've received three "government contribution" payments and three "credit interest" payments since then. The payment from the 12 - 13 year were $935 and $881.72 respectively. I was taxed $132.25. I put $5500 in this year (didn't know it went up to $6000). Pretty good I reckon.

My understanding is the government contributed 17% of what you deposit per annum but the bank pays their normal interest rate for the entire account total. Example. In a single financial year I deposited $5500 so got $935 from the government (17%). But from previous years I already had some cash in their making the account total, let's say, $20,000 with a 4% interest rate. So I got $800 from the bank.
 
strath39 said:
Are you able to buy an investment property with the First home saver account?
Click to expand...

I'm fairly sure, as one with a first home saver account, that you must live in the purchased property for atleast 6 months after initially buying it.
 
strath39 said:
Are you able to buy an investment property with the First home saver account?
Click to expand...

RU486 said:
I'm fairly sure, as one with a first home saver account, that you must live in the purchased property for atleast 6 months after initially buying it.
Click to expand...

That's correct.

No… First Home Saver accounts can only be used for buying a first home or building a first home – and the home must be lived in for a continuous period of 6 months.
Click to expand...

http://www.firsthomesaver.com.au/faq/frequently-asked-questions

My GF and I each have a FHSA (with ME Bank), planning to combine towards a first place in a couple of years. Really great investment assistance for Uni students, in our opinion.

Have been leaving the savings in a highish interest savings account during the year, to max interest there, and then dump into FHSA in the last week of the FY, to get in before the deadline and to get the govt contribution.
 
FYI for everyone from the budget

Abolition of the first home saver accounts (FHSA) scheme
In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme;

  • New accounts created in respect of applications made from 7.30pm, Tuesday 13 May 2014 will not be able to access any concessions or the government contribution.
  • Eligibility for a government contribution will cease from 1 July 2014. Existing account holders will continue to receive the government contribution for personal contributions made during the 2013-14 income year.
  • Tax and social security concessions will cease from 1 July 2015. Existing account holders will continue to receive all tax and social security concessions associated with these accounts for the 2013-14 and 2014-15 income years.
Click to expand...
 
Thanks for sharing.

I don't completely understand what it means.

My situation - I've had my first homesavers account open for long enough that I can now use the money as part of my deposit. But I'm still not ready to buy.

I've been dumping in $100 a month under the assumption that I'd need some sort of minimum deposit to receive the high interest rate. Should I continue with that or should I just leave the account until I'm ready to use it?

Also, as my account has been open for more than four financial years, I made the assumption that I wouldn't be getting the 15% on the dollar. Is that correct? If I'm still entitled to that, I'd best drop a few $K in before the end of the financial year.
 
superfraser said:
Thanks for sharing.

I don't completely understand what it means.

My situation - I've had my first homesavers account open for long enough that I can now use the money as part of my deposit. But I'm still not ready to buy.

I've been dumping in $100 a month under the assumption that I'd need some sort of minimum deposit to receive the high interest rate. Should I continue with that or should I just leave the account until I'm ready to use it?

Also, as my account has been open for more than four financial years, I made the assumption that I wouldn't be getting the 15% on the dollar. Is that correct? If I'm still entitled to that, I'd best drop a few $K in before the end of the financial year.
Click to expand...

You could contribute up to $6,000 a year (used to be 5.5) and receive a 17% co-contribution from the government (so about $1000). That continued every year you had the account open and made your deposit. You just had to wait for 4 financial years before you could withdraw the money to purchase a property.

You will still receive a co-contribution for any money you deposit up until June 30 this financial year. So if you're shy of the 6,000 mark, you still have a bit over a month to make up the difference.

As of July (2014-2015 financial year), the government co-contributions cease.

As of July 2015 (2015-2016 financial year), you lose the favourable taxation rate on interest earned. But you can keep your money in there.

I'm not quite sure what it means when it says "Restrictions on withdrawals cease after July 2015". I assume that means you can take the cash out and don't need to use it to buy a property.
 
J_Moore said:
You could contribute up to $6,000 a year (used to be 5.5) and receive a 17% co-contribution from the government (so about $1000). That continued every year you had the account open and made your deposit. You just had to wait for 4 financial years before you could withdraw the money to purchase a property.

You will still receive a co-contribution for any money you deposit up until June 30 this financial year. So if you're shy of the 6,000 mark, you still have a bit over a month to make up the difference.

As of July (2014-2015 financial year), the government co-contributions cease.

As of July 2015 (2015-2016 financial year), you lose the favourable taxation rate on interest earned. But you can keep your money in there.

I'm not quite sure what it means when it says "Restrictions on withdrawals cease after July 2015". I assume that means you can take the cash out and don't need to use it to buy a property.
Click to expand...

Thanks mate, I really appreciate that. I'll make sure to drop the $6K in.

It would be brilliant if I'm able to take the money out without needing to buy a place. That would be a massive win!
 
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