First Home Saver Account benefits abolished

I read your article 'First Home Saver Account benefits abolished' by Graham Hand on 16 May 2014, which mentioned a phone number being obtained for the FHSA expert at the ATO. Are you able to provide this number please? I am an owner of a FHSA looking for more precise information than our bank can give us, in light of the pending changes you discussed.

Hi Ben, after researching the article, I did not retain the phone number of the FHSA person, but if you call the ATO directly, I'm sure they will give it to you.

I hold an account right now. The frustrating thing about this decision is not that it has been abolished, but that I still can't access my money until one year after the co-contribution from the govt. ceases.

This means that my money is now locked into an account for another 12 months at a lower interest rate than market rates for 12-month term deposits (e.g. my FHSA interest rate is 3.65%, term deposits at the same credit union are 3.85% to 4%).

Two years ago I began investing in this account in the knowledge that the money would be locked away - changing the conditions of the account midway through the life of the account feels like a broken contract. The Abbott government has essentially broken a promise to people who chose to open the account in good faith (e.g. not use it as a tax haven) and hijacked my savings which could be used in other more worthwhile investments for a further twelve months.

Great stuff....

3 Tim's commenting from 13 comments...

Tim F, you make a great point. There is also an excellent discussion on this on whirlpool

Ramani, why not release money after final co contributions have been paid. Would maybe make 6 months difference to account holders.

In fact, what Tim proposes is what happens in the existing scheme if, for example, a holder closes their account before the final government contribution has been received. The holder fills in a form nominating another account.

As any pesky teenager will tell you: 'Because'. Or as an old man like me will tell you: 'Those who pay the piper call the tune'. Easier logistically to pay into the same account as before, instead of the additional step of getting account details, sending cheques, reconciliation etc. Gift horses such as FHSA do not like oral examination!

Damian's comments of unfairness unfairly ignore the logistics of wind-up. This must occur without trampling upon the retained entitlement of those who contributed before the budget night, for a final co-contribution in 2014/15. This requires tax returns to be lodged (could take up to 15 May 2015 for those who use a tax agent), and the ATO to process them.

As any party ends, the hosts cannot leave with the guests. They must stay back to settle the dues, count the crockery, restore the furniture and clean up!

Why can't the co-contribution be paid into another of my accounts when my tax return is finally processed?

Grossly unfair to remove the co-contribution and leave account holders locked in for an additional 12 months. This decision constitutes a breach of contract by the govt. As the account conditions have changed so significantly all funds should be releasable at 01 Jul 14.

Absolutely agree. The government is giving the banks young (mainly) people's money to hold for a year and pay them whatever they want in interest. If the banks (ME Bank in my case) want to keep my money they should earn the right through competitive rates. We abolished mortgage exit fees to increase competition in the banks, this is a sham.

Will there be a possibility of changes to this? Between my wife and I we now have over 30,000 locked in this account for a year earning minimum bank account interest. The government should use some of the saving from scrapping the scheme to bail out the banks foreseen losses or costs in winding it up. What was a help has now become a hindrance to young potential home buyers.

This was a very useful scheme. My 27 year old daughter and her husband have an account each and have been contributing as much money as they could for the last four years. The benefits were worth it for them as they have been able to build up a substantial deposit that will now enable them to buy their first house, next month. We live in a country town where house prices are much less expensive. As my daughter and her husband said " free money from the government, what is not to like"?

Tim has whittled down the great returns this offered, and as Gary & Paul point out, it is difficult to identify an investment (minimum term 4 years) that offers a state-guaranteed after tax return of 17% in the first year upto a maximum of $6000 each year subject to an account cap of $ 90,000. Given our appetite for home ownership, most will save, but this was a huge incentive. Other than age, contribution and residence checks, there was no constraint. A billionaire's daughter could access it for years.

That is perhaps why the behavioural economists in Treasury policy figured out that there is no point in continuing the incentive, which among other things adds to the market frenzy. Amid all the cutting, the axing is not all that unfair. My 28 year old son, looking to buy his first home, disagrees.

The government effectively giving you $20 per week to contribute towards the purchase of a home is not that incentivising to jump into an overpriced housing market.

It wouldn't even incentivise most people to save for a holiday.

Tim, I think you're missing most of the point. The ability to have up to $90,000 sheltered in a taxed advantaged area, whilst saving for a home was a significant benefit that has now been lost.

Pity this has gone. Among all the noise on other budget changes, nobody is discussing this. Thousands of people accepted the government offer to help to buy a first home and the changes are retrospective, removing the benefits while still locking up the money until July 2015. Yet not a word of complaint.

This is good! I have been trying to find information on how to get an early release! My money is sitting there.... getting taxed.... :(