Friday, 17 June 2011

Revisiting First Home Savers Account: now an even better idea

by Rob d'Apice
Back in April, we wrote a post about the government's First Home Savers Account.

We talked about how it's good for two reasons:
  • For every $100 you put into the account, the government puts in $17
  • The tax payable on the interest earned in the account is capped at 15%

The downside to the scheme is the '4 Year Rule' - you need to make contributions of at least $1,000 in four different financial years before you could use the money to buy a house; and if you bought a house before then or changed your mind, the money would become locked up in your superannuation.

What's changed?

A friend of Prosple pointed out this recent change to the scheme which has relaxed the '4 Year Rule'.  If you buy a house before you have completed all 4 years, you can now withdraw the money after the remaining years have elapsed to use toward mortgage repayments - meaning that it's not locked away in super until your retirement.

So is it a good idea now?  If you are sure that you will one day want to buy a home in Australia, then it's hard to see how this is a bad idea (in fact, we're going to open one up right now).

Want another reason?

The 2010-11 Financial Year is coming to an end.  If you open an account now and make at least a $1,000 contribution before the end of June, you will have already satisfied one year of the 4 year requirement, meaning there's only a 3 year wait until you can get your funds.

Are you going to open an First Home Savers Account?  Let us know in the comments!


  1. I opened one last Friday. There is one possible trap I found is that if you were unfortunate enough to put money in the account and then almost straight away buy a house. If this occurred you might end up paying more in extra interest while you wait for the 4 years to be up.

    Fortunately, the maths that I did to check this indicated that so long as you don't put too much into the account you still end up in front. In fact, to extract the most value you should contribute up to the $5500 mark and no more per financial year and extra cash should go in a regular savings account.

  2. What bank did you end up going with?