First Home Saver Accounts can be a simple and tax effective way for Australians to save for their first home through a combination of Government contributions and low taxes.
The government will contribute 17% of the account holder's personal contributions for the financial year. For the 2009/10 financial year, contribution threshold is $5,000 and the government can make a maximum contribution of $850. For the 2010/11 financial year, the threshold goes up to $5,500 and maximum government contribution increases to $935.
Account holders do not need to make a minimum annual deposit to keep the account open. Government contributions will be paid directly into the account after the individual has lodged their tax return and the account provider has submitted relevant information with ATO.
Overall account balance has a limit of $75,000 (indexed). In 2010/11 financial year, this will increase to $80,000. Once an individual reaches the account balance cap, no further individual contributions can be made to the account.
Contributions made to a First Home Saver Account will not be subject to tax and withdrawals to purchase/build a first home to live will be tax free. However, interest received from the account will be taxed at 15%.