Title:
Federal Government Abolishes First Home Saver Account Scheme
Subtitle:
The federal government announced in its recent budget that it was scrapping the First Home Saver Account scheme for First Home Buyers – a move that is unlikely to be opposed by the Labor government.
Body:
The federal government announced in its recent budget that it was scrapping the First Home Saver Account scheme forFirst Home Buyers – a move that is unlikely to be opposed by the Labor government.
Those who currently have one of these accounts need to make sure they understand the changes.
The First Home Saver Account scheme was introduced by the Labor government in 2008. When it was announced, there were predictions that up to 750,000 accounts would be opened, but as of last December, only 46,000 people had opened one.
Under the scheme, the government made a co-contribution payment of up to $1020 (or 17 per cent) on the first $6000 that account-holders deposited each year. While there were tax concessions associated with the accounts, there were also restrictions around access to the funds, including that they were only to be used towards payment for first homes.
Those who opened one of these accounts after budget night – May 13 – will not be entitled to the government co-contribution or any tax concessions.
For accounts that existed before this date, the government co-contribution will only be paid on deposits made until July 1, 2014 - any deposits made after July 1 this year will not receive a co-contribution. Existing tax concessions will no longer apply after July 1, 2015. That is, until this date, any interest earned on the account will be taxed at 15 per cent but after that, the usual taxation rate will apply.
Account-holders will not be able to withdraw any of their funds until July 1, 2015 from which date these accounts will be abolished. After this date, these accounts will be treated like any other account.
It is still early days regarding the changes associated with these types of accounts so account-holders should contact their financial institution for further clarification.
Source:
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