28 Feb First Home Saver
We have a number of clients who are either considering buying their first home, or would like to assist their children to get into the property market. Saving up can be difficult once you consider a 20% deposit (if you wish to avoid paying Lenders Mortgage Insurance) plus stamp duty. This can require savings of well over $100,000.
The State Governments in Australia each have grants for first home buyers, however this is limited to $7,000 in Victoria, and under usual circumstances, the property must be below $750,000. To supplement this offering, the Australian Government has an additional lesser-known support package for individuals saving for their first home – the First Home Saver Account (FHSA).
The FHSA is offered by several institutions (e.g. Member’s Equity, and various credit unions). The primary benefits of the account are:
- Government co-contribution of 17% on funds contributed based on a maximum contribution of $6,000 (indexed) each year, i.e. the maximum Government contribution is $6,000 x 17% = $1,020.
- Contributions beyond the $6,000 limit are still allowed, however do not attract the 17% Government Contribution.
- interest on savings taxed at 15% – if you’re earning more than $18,200 a year, this is lower that your marginal tax rate, and
- should you decide not to purchase your first home with the funds, they can be rolled into your superannuation fund.
Importantly, each member of a couple who intend to buy a house together, can open their own FHSA to benefit from two lots of Government contributions.
For example:
A couple both 20 years old each save just $500 per month ($6,000 per year) for five years in their First Home Saver Accounts, earning interest of 3% p.a. Over this period, the Government contributes $10,880 and interest of $4,734 is accrued. On an after-tax basis, this results in approximately $10,000 more than if it were invested in an ordinary savings account. The now 25-year-old couple have almost $75,000 saved, with the addition of the first home buyer’s grant.
There are a number of rules which govern accessibility to the scheme. To discuss the relevance of the FHSA to your particular situation, please contact us.
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About Reuben Zelwer
Reuben Zelwer established Adapt Wealth Management in 2011 to help time poor clients achieve financial freedom. For over 15 years, Reuben has helped professionals, executives, business owner and those approaching retirement make the most of their circumstances by making good financial decisions. Reuben’s professional practice is complemented by substantial voluntary work, which has included setting up financial literacy and savings programs in the local community. |