Federal government scraps First Home Saver Accounts scheme new accounts
The Federal government has scrapped the First Home Saver Accounts scheme, ruled off from tonight's budget speech for new accounts.
The government expects to make $143 million in savings over five years from its ditching.
It was a Rudd government initiative where accounts attracted government co-contributions and tax breaks, which will no longer be on offer to new intending first home buyers.
Under the scheme, savers paid concessional tax rates of 15 percent on interest earned in the accounts and the government made a 17 percent co-contribution on the first $6000 contributed each year.
It was also reported government co-contributions to the existing accounts will end on 1 July and tax and social security concessions will be withdrawn from July 2015.
The government program, launched in 2008 by Kevin Rudd, was predicted to help hundreds of thousands of future home buyers.
However, statistics from the Australian Prudential Regulation Authority show that $521 million is held in 46,000 First Home Saver Accounts as of December 2013.
Period | Mar 2013 | Jun 2013 | Sep 2013 | Dec 2013 |
|---|---|---|---|---|
Number of FHSAs ('000) | 40.2 | 45.2 | 45.3 | 46.0 |
Balance of FHSAs ($m) | 416.8 | 491.0 | 499.7 | 521.5 |
This figure is still just a fraction of the 220,000 first-home savers projected to open accounts by 2009 and the 2012 target of 700,000.
Only 18 institutions offered accounts. The average base interest rate being paid on these accounts being 2.54%.
A number of conditions are currently in place, including that a $1,000 minimum deposit must be reached yearly for four financial years before you can withdraw. The account's balance is capped at $90,000.
There is an average of $11,300 in the accounts which, readers point out, can exceed $90,000 with interest but savers can't deposit more after it reaches $90,000.
Late last year, with first home buyers' low numbers, RateCity urged a review of the First Home Saver Account Scheme.
Ninemsn reported the first home saver accounts scheme was scrapped as Treasurer Joe Hockey said it had done little to improve housing affordability.
First home grants to buyers, handed out in conjunction with state governments, will continue unaffected.
Property Observer will report further this week on the specifics of the implementation of the budget decision, including any revised exit entitlements.