From 1 July 2008, the federal government will offer first home buyers a fantastic deposit saver scheme which is the first of its kind in Australia. Called 'First Home Saver Accounts', the scheme offers deposit saving support for first home buyers and is designed to assist Australians aged 18 and over to save for their first home.
First Home Saver provides a simple, tax effective way for Australians to save a deposit for their first home through a combination of a Government contribution and low taxes.
In summary, here is how it works
The Government will pay a contribution on up to $5,000 (indexed) of individual deposit contributions made each year, and you can contribute a maximum of $10,000 each year (indexed). Investment earnings (or interest) that accrue in the accounts will be taxed at 15 per cent. Withdrawals will be tax free where they are used to purchase a first home to live in.
Eligibility
You can open an account if you:
- are aged 18 or over and under 65;
- are an Australian resident for taxation purposes;
- have not previously purchased or built a first home in Australia to live in;
- do not have or have not previously had an account; and
- make an initial contribution of at least $1,000.
Contribution arrangements
There are certain contribution requirements if you are starting a first home buyer deposit saver account:
- Individual contributions of up to $10,000 (indexed) may be made into an account each year. These contributions may be made by the account holder or another party, such as an employer, on behalf of the account holder.
- Contributions have to be made from after-tax income.
- The Government will make an additional contribution which will be paid directly into the account, with arrangements broadly reflecting those for superannuation.
- The Government contribution will be made on up to $5,000 of individual contributions each year.
- The contribution level will be either 15%, or the account holder's marginal income tax rate less 15%, whichever is greater.
- Individuals with incomes of up to $80,000 who contribute $5,000 to their account will receive a Government contribution of $750.
- For individuals on incomes above $80,000, the contribution will vary depending on the marginal income tax rate of the individual.
See a table of contributions and tax rates on the Xinc website.
If you have a savings goal or home in sight, it pays to talk to a good mortgage broker who understands both the first home saver scheme and can help you understand what your home loan options are as well as set up your savings scheme with the right bank for you. Call 13 XINC at any time and we will have a broker in contact with you within 2 business hours. Or visit the Xinc website.
