Kevin Rudd’s first-home buyer housing initiative – the first-home saver account (FHSA) incentive – has topped 40,000 savings accounts with a surge in new accounts over the first three months of the year.
In total, $416.8 million is held in 40,200 accounts equating to average savings per account of around $10,300.
The scheme, which was slow to gain traction when launched is still nowhere near the planned 750,000 savings accounts the government hoped would be opened by 2012.
There were 1200 new savings accounts opened over the first three months of the year, more than double the 500 opened in the final quarter of 2012, according to APRA figures.
First home saver accounts
The scheme aims to help first-time buyers save for a deposit for their first homes.
Under the FHSA, the government contributes 17% on the first $5500 of individual contributions made each year. Account holders are required to keep savings in the FHSA for four financial years before they can use the funds to buy a home.
The government amended the scheme last May to allow savings in an account to be paid into an approved mortgage at the end of the minimum four-year qualifying period, if the saver bought a home earlier, rather than require that the money be paid into a superannuation account.
However, should a saver decide not to buy a home (for example they may decide to head overseas), the money must still be transferred into the saver’s super fund and can only be accessed when they retire.
In February last year Property Observer noted the scheme was gaining traction among first-home buyers, despite the abandonment of the scheme by the Commonwealth and ANZ banks.
According to APRA, the savings accounts are offered through 17 institutions, the bulk of which are credit unions and building societies, but also the Commonwealth Bank and AMP.
ANZ pulled out of the scheme in October last year.
A spokesperson for the Commonwealth Bank said it was no longer offering new accounts.
The main features of these accounts are:
- The interest you earn on the account is only taxed at a rate of 15%.
- You have to save at least $1000 each year over at least four financial years before you can withdraw the money. These four years do not need to be consecutive.
- The maximum account balance is capped at $90,000 but this cap will be indexed in future years. After your savings reach this level, only interest and earnings can be added to the balance.
- The money has to be used for your first home. If it is not, it is added to your super and you can’t access it until you are retired or can meet another condition of release.
- If you buy your first home before the four-year period is up, you can withdraw the money in your account at the end of the four-year period to put towards your mortgage. You will not be able to make any more deposits once you have built or bought a property.
This article first appeared on Property Observer.