First home saver accounts

Help you save for your first home

If you are saving for your first home, a first home saver account is a good way to help you reach your goal. The government will contribute an extra amount that is a percentage of your savings each year.

These accounts have a few rules so it's important to make sure they are right for you.

What are first home saver accounts and how are they changing?

Important


The Federal Government has abolished first home saver accounts effective 1 July 2015:

  • Accounts opened after 7:30pm Tuesday 13 May 2014 will not be entitled to the government contribution
  • Existing account holders will not be eligible for a government contribution on personal deposits after the 2013-2014 financial year
  • Tax and social security concessions will cease 1 July 2015
  • Restrictions on withdrawals will be removed on 1 July 2015

Unlike other savings accounts, a first home saver account can only be used when you are saving to buy or build your first home.

Currently the government makes a 17% contribution on the first $6,000 you deposit each financial year. This means that if you deposit $6,000 in one financial year, you will receive $1,020 from the government.

Some of the main features of these accounts are:

  • The interest you earn on the account is only taxed at a rate of 15%.
  • You have to save at least $1,000 each year over at least 4 financial years before you can withdraw the money. These 4 years do not need to be consecutive.
  • The maximum account balance is capped at $90,000 but this cap will be indexed in future years. After your savings reach this level, only interest and earnings can be added to the balance.
  • The money has to be used for your first home. If it is not, it is added to your super and you can't access it until you are retired or can meet another condition of release.
  • If you buy your first home before the 4 year period is up, you can withdraw the money in your account at the end of the 4 year period to put towards your mortgage. You will not be able to make any more deposits once you have built or bought a property.

To see how these types of accounts work, use our first home saver calculator.

First home saver calculator

Are first home saver accounts right for you?

Only for your first home

First home saver accounts earn high interest and you get a government bonus to put towards your deposit. Make sure you think hard about your future needs before opening a first home saver account. If, for example, you decide in 3 years that you'd rather move overseas or put the money into a new business, you won't be able to use the money in your first home saver account.

The money can only be used to buy your first home and if you decide not to use it for this purpose, it must be transferred to your super and you won't be able to access it until you are retired or can meet a condition of release.

Only for a home you live in

The funds from your first home saver account can only be used to buy a property you intend to live in. The occupancy rule states that you must live in the home for at least 6 months and it must be your main residence.

The 6-month period must start within:

  • 12 months of you becoming the home owner (from settlement date) or;
  • 12 months from the day construction was completed if you are building a home

Be sure you can fulfil these rules before you open a first home saver account. Consider other savings options if you don't think you can meet all the criteria.

Saving with your partner

First home saver accounts can only be opened by an individual, so if you are saving with a partner you should each open an account. You will only have to wait until one of you reaches the 4-year savings mark to withdraw from both accounts, provided your house is bought in both your names. If you both have accounts, you will also both be eligible for the government contributions.

You may use your first home saver account to buy a property with a partner who has previously owned a home as long as you are a registered owner and this is your first home. 

Case study: Alex and Tony have found their dream home

""Alex and Tony each have their own first home saver account. Alex has been saving at least $1,000 each year for 5 years while Tony has only had his for 2 years. But because Alex's account has been open for 5 years, they satisfy the 4-year rule. They can combine their savings to buy their home.

The risks of only having one account

Opening one first home saver account with your partner can be risky. Think about what will happen if the relationship ends and you decide not to buy a house together.

If the account is in your name, how will you repay the money you have both saved? If the account is in your partner's name, how will you get your money back?

Where to get your first home saver account

Due to the proposed legislative change most approved deposit taking institutions have ceased offering first home saver accounts.

Accessing the money in your first home saver account

You will usually want to access your first home saver account when you are ready to buy or build your first home. The Australian Taxation Office's factsheet on accessing your funds explains when you can access your money.

You will need to apply to your first home saver account provider get the funds released. You will have 6 months to use these funds towards the purchase or building of your first home. See the ATO's factsheet on building or buying your first home for more information.

If you are buying your first home but haven't met the conditions to access your money, you must notify your account provider within 30 days of signing a contract to buy or build. See the ATO's webpage on paying towards a mortgage for more information.

First home saver accounts can be a really good way to maximise your savings for your first home. Make sure you understand all the rules of these accounts to decide if they are right for you.


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Last updated: 02 Jul 2015

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