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Boost for first home buyers

THE establishment of First Home Savers Accounts (FHSA) to help Australian first home buyers save for their first home and help fight inflation have been formally approved.
First Home Saver Accounts are the first of their kind in Australia, and from July 1, 2008 will ensure a couple each earning average incomes and saving for their first home, putting aside 10 per cent of their incomes, will be able to save a deposit of more than $85,000 after five years of disciplined savings.
This is up to $14,000 more than they would have saved otherwise, depending on returns.
The First Home Saver Accounts have been considerably strengthened since their first announcement during the recent election campaign.
Improvements include:

Boosting assistance for low income earners through the provision of a minimum 15 per cent Government contribution on after tax contributions of up to $5,000; and
Delivering a streamlined up-front Government contribution directly into accounts rather than through a more complex system of salary sacrificing.

Helping to fight inflation
First Home Saver Accounts are also part of the Australian Government's five point plan to win the war on inflation, encouraging private savings and helping put downward pressure on inflation and interest rates.
This initiative will help boost national savings, with the accounts anticipated to hold around $4 billion in savings after four years.
The government will invest $850 million over the first four years of this initiative to give first home buyers access to the newly-created accounts.
The strengthened financial support now offered by the Australian Government's First Home Savers Accounts reflects the increased financial pressure many families now face.
"Since the announcement of the FHSA policy during the election campaign, we have worked to improve the policy to provide greater benefits to lower income earners," said Treasurer Wayne Swan.
"We will now ensure low income earners benefit from the First Home Saver Account by providing a minimum 15 per cent contribution on after-tax contributions of up to $5,000.
"This means Australians paying no tax, or those on the 15 per cent marginal income tax rate, with individual contributions of $5,000 will receive a $750 Government contribution paid into their First Home Saver Account.
"Those on the zero and 15 per cent marginal income tax rates may not have otherwise benefited."
Other improvements include:

Simplification of the contribution arrangements - there will be a single annual post-tax contributions cap of $10,000 (indexed); Improved accessibility - banks, building societies, credit unions and life insurers will be able to offer the accounts.
Aspiring eligible first home buyers will benefit from the enhanced First Home Saver Accounts, regardless of their marginal income tax rate.

Help for working families
The new First Home Saver Accounts will reflect the arrangements for superannuation - allowing first home buyers to access similar benefits on their first home savings, and unlock higher returns.
The FHSA initiative will complement the Government's National Housing Affordability Strategy to increase the supply of affordable first homes.