What You Need to Know About First Home Saver Accounts

It can be quite difficult to save up money to buy your very first home. Your budget is already stretched as it is for your utilities, groceries, and your other expenses, that shelling out some more cash for your savings might seem like an impossible task.

However, the great thing is that Australians can enjoy what is called the First Home Savers Account (FSHA). Launched in 2008, it provides first time home buyers with a simple way to save up to buy their first property with an added benefit of low taxes. In this article, we're going to give you an overview of the FSHA and how you may benefit from it.

How the FSHA Works

Basically, the FSHA provides a 17% co-contribution for every dollar that you save to buy your first home. In 2010-2011, the maximum annual government contribution was at $935, based on 17% of $5,500. What's more is that the government won't tax you for your savings.

Here are other features of the FSHA:

  1. You may set it up with any building society, participating bank, or credit union
  2. You may apply for the First Home Owners Grant (FHOG) along with the FSHA

Eligibility Requirements

As with the FHOG, every applicant of the FSHA must meet certain requirements to be able to open an account. The applicant:

  1. Must be aged 18-65 years old
  2. Must have a tax file number
  3. Must be a first-time applicant of the home save account
  4. Must not have previously owned a home in the country which has been the applicant's main residence
  5. Must not make contributions from his or her after-tax income

How It's Different From Regular Savings Accounts

Please note that while the FHSA functions like a regular savings account, it has several differences with the latter, such as:

  1. You need to contribute at least $1,000 annually for a minimum of four financial years before you could withdraw your savings to buy our first home; those 60 or older are exempt from this as they can withdraw their money any time.
  2. You can only move the money to your super when you close your account; you cannot withdraw the money.

With these in mind, you should keep a separate savings account if you wish to have quick and easy access to your funds. Use the FHSA only for the purpose of saving money to buy your first home.

When it comes to buying a home, you deserve to get only the best deal for you. That is why we recommend that you contact our consultants at Rate Detective. They will put your personal circumstances into consideration and provide you with rate comparisons of Australia's top lenders. This ensures that you get a home loan that truly fits your budget and lifestyle.

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Published on November 11-th, 2012 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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