First home saver accounts

A new government scheme provides incentives for new home buyers, but watch for traps.
 
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02.How the scheme works

  • For every dollar you put into a FHSA, the government will add 17 cents. The maximum government co-contribution is $850 for each financial year (indexed, so the figure will increase over time). This year, if you put in $5000, the government will add $850. You can contribute more if you like, but only the first $5000 is eligible for the government’s 17% co-contribution.
  • The government contribution will be received in the financial year after you lodge your income tax return and the FHSA provider files its reports with the tax office.
  • You’ll also be able to earn interest at the rate the account provider offers or depending on investment performance.
  • 15% tax applies to the interest or growth of the account. Tax is paid by the account provider.
  • You must keep the account open for at least four separate financial years (they don’t have to be consecutive years) and contribute at least $1000 each year before withdrawals can be made.
  • The maximum account balance is currently $75,000 (including any government contributions, interest earned, your savings, etc). The figure will be indexed over time and can increase in $5000 increments.
  • You can only withdraw money to buy or build your first home. If you close the account for another reason, its balance is automatically transferred to super. Withdrawals after four years to buy a home, or transfers to super, are tax-free.
 

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