Free money: First home saver

Reported by Maria Bekiaris

BY MARIA BEKIARIS

MONEY MAGAZINE, JUNE EDITION

Compare the rates

If you’re saving up for a deposit for your first home the federal government will top up your savings if you’re using a “First Home Saver Account” (FHSA). FHSAs are designed to help those 18 and over save for their first home. The government will add 17 per cent to the first $5500 deposited in a FHSA in any year. And another bonus is that any interest you earn will be taxed at a maximum of 15 per cent.

You have to make contributions of at least $1000 for each of four financial years (not necessarily consecutive) before you can withdraw the money. And you can only withdraw money to use towards purchasing a first home or building a home to live in. If you do buy a house before the four years are up you’ll still be able to use the savings towards your mortgage, but only after you’ve had the account for four years. Until early 2011 if you bought a house before meeting the four-year rule your savings had to go into your superannuation.

There are 17 institutions offering FHSAs and it’s worth comparing rates. According to Canstar the range of interest on the accounts available was 0 per cent to 5 per cent, which can equate to a difference of $1250 worth of interest earnings on a $25,000 deposit! See www.firsthomesaver.com.au for more information.

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