Superannuations

Overview

First home saver accounts offer a tax-effective way of saving for your first home through a combination of government contributions and low taxes.

They’re a special purpose account that is more like a term deposit than a normal, everyday account because you have to keep the money there for a minimum period of time. Once that time has passed and you make the decision to buy or build your first home, you have to withdraw all the money at once and close the account. You need to use the money you save as a deposit or to meet other costs you incur in buying or building your first home.

Benefits

There are several good reasons to open a first home saver account. The more money you save, the more the government will contribute – up to a certain limit each year, and there’s also a tax incentive to save money for your home because earnings are taxed at 15%.

Eligibility

You need to understand the separate rules for eligibility to:

• open an account
• make contributions
• receive the government contribution
• access your funds.

Opening an account

Not all first home saver accounts are the same. Choose the account provider you want to have your account with and read their product disclosure statement to find out more. Banks, building societies, credit unions, life-insurance companies, friendly societies and trustees of public-offer super funds can all offer first home saver accounts.

Building your account

Once you’ve opened an account, you can make personal contributions. Other people (such as your parents or other family members) can also help you out by contributing to your account.

The government will make a contribution equal to 17% of your personal contributions for the financial year, up to a maximum amount each year.

Closing your account

To withdraw your funds, you need to meet a condition for release and you can’t just withdraw some of your money – you must withdraw the full amount and close the account.

If you change your mind about buying a home, you cannot simply close your account, withdraw your funds and spend the money. You must close your account and transfer the balance to your superannuation (unless you are aged 60 or over in which case the balance can be transferred directly to you) and you cannot ever open another first home saver account.

Education tax refund

The education tax refund assists you with the education costs of your dependant, including personal computers. You can claim the education tax refund if you are receiving or entitled to receive family tax benefit Part A. This means you must have lodged a claim for family tax benefit Part A for the child and had your claim approved.

Income tax offsets (formerly rebates) for families

Tax offsets reduce the amount of tax you pay. We use the information on your tax return to calculate your income tax offsets. Depending on your circumstances, you may be eligible for one or more of the following offsets:

• dependent spouse (without dependent child or student)
• child-housekeeper or housekeeper
• parent, spouse’s parent or invalid relative
• spouse superannuation
• private health insurance
• net medical expenses
• government benefits (for example, government pensions or Centrelink payments)
• low income (such as part time participation in the workforce)
• senior Australians.

Investing on behalf of children

Investments (including savings accounts and shares) in the name of dependent children under the age of 16 attract special income taxation rules. If the child’s tax file number is not supplied to the investment body, they must withhold tax at 46.5% of interest earnings. Earnings from a child’s investments must be declared by the person who rightfully owns and controls the investment.

Superannuation for families

Super is important in planning for your retirement. You may be eligible for a super co-contribution, or for a tax offset for making contributions to your spouse’s superannuation.

Family breakdown

The tax system has provisions in place to assist with easing the financial burden of separating families. These provisions apply to capital gains tax, superannuation and income from child and partner support payments.

Baby bonus

If you had or adopted a child between 1 July 2001 and 30 June 2004, you may be eligible for a baby bonus until your child turns five years old. The 2008-09 financial year was the last year for current year claims, but late claims will be accepted until 30 June 2014.