Four things you must know about the axed First Home Saver Accounts

With the news that the Abbott government has scrapped the First Home Saver Accounts scheme in its first federal budget, many account holders have been left confused about what will happen to their money.

Under the scheme, the government made a co-contribution of up to $1,020 on the first $6000 savers deposited each year. Account holders were also entitled to tax concessions but had restrictions on when they could access their money, which was only to be used for a payment on their first home. Before the budget changes, if savers wanted to withdraw the money in their First Home Saver Account, they had to meet a number of requirements.

Firstly, they had to contribute at least $1,000 a year to the account for at least four (non-consecutive) years, and they had to hold the account for at least four years. Even then, the money could only be withdrawn to pay for a home, unless you wanted to wait until you were 60 years old to access the money directly.

While the proposed budget changes have not been passed by Parliament, it doesn’t look likely that the Opposition will attempt to save the scheme.

If you hold a First Home Saver Account or were thinking of opening one, here’s what you need to know.

1. Accounts opened after 7:30pm on Tuesday 13 May will not be entitled to the government co-contribution or tax concessions.
   
   
2. Government co-contributions will now only be earned on deposits made until 1 July 2014. You will still receive your maximum co-contribution of $1,020 if you deposit $6000 for the 2013-14 year, but any deposits made after 1 July this year will not receive a co-contribution.
   
   
3. No more tax and social security concessions after 1 July 2015. For the 2013-14 and 2014-15 years any interest you earn on your accounts will be taxed at 15%, but after that, you will be taxed at the usual rate for your earnings.
   
   
4. Restrictions on withdrawals will be removed after 1 July 2015. First home savers accounts will be totally abolished on 1 July 2015.
   
   Treasurer Joe Hockey said, "As of 1 July 2015, account holders will be able to withdraw their account balances without restriction. Once the First Home Saver Accounts scheme is abolished from 1 July 2015, these accounts will be treated like any other account held with a relevant provider."
   
   This seems to mean that as of 1 July 2015, you can use the money in your First Home Saver Account for any purpose you like.

To get more clarity on the status of your First Home Saver Account, contact your bank.