The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

27 May 2008

NO.015

First Home Saver Accounts Bill 2008

Second Reading Speech

27 May 2008

First Home Saver Accounts will help bring the dream of home ownership closer to a reality for many thousands of young Australians.

Rising house prices have increased financial pressures on households and made it harder to save a deposit for a first home.

Home ownership is vital to the economic and social wellbeing of Australians.

It is a stable base from which to participate in society, and the primary asset for most families.

In recognition of this, we committed in the election campaign to introducing First Home Saver Accounts.

Today, the Government is delivering on that promise.

First Home Saver Accounts are the first of their kind in Australia and will provide a tax effective way for Australians to save for a first home to live in, through a combination of Government contributions and low taxes.

For example, a couple each earning average incomes, both putting aside 10 per cent of their income into individual First Home Saver Accounts, would be able to save more than $88,000 after five years.

The introduction of the Accounts will also help spark a new savings culture amongst young Australians.

The Government has undertaken an extensive consultation process and has improved the accounts in line with industry and community comment. The result is a policy that is fairer and simpler to administer.

The legislation for First Home Saver Accounts is contained in three Bills.

  • The main Bill is the First Home Saver Accounts Bill 2008, which establishes the accounts, provides for the payment of the Government contribution and governs their operation and prudential regulation.
  • The First Home Saver Accounts (Consequential Amendments) Bill 2008 contains consequential amendments to other Commonwealth laws, chiefly the taxation and corporations law.
  • The Income Tax (First Home Saver Accounts Misuse Tax) Bill 2008 imposes the misuse tax to clawback benefits obtained by an account holder who improperly uses the accounts.

The main features of the accounts are as follows:

  • An individual can open an account if they are aged 18 or over and under 65; have not previously purchased or built a first home in which to live; do not have, or have not previously had, a First Home Saver Account; and provide their tax file number to the provider.
  • Personal contributions can be made by the account holder or a parent or grandparent, and can only be made from after-tax income.
  • The account is supported by Government contributions. The Government will contribute an extra 17 per cent on the first $5,000 of personal contributions made into the account each year. This will be indexed to average weekly ordinary time earnings. This means that an individual contributing $5,000 will receive a Government contribution of $850.
  • There is an overall account balance cap of $75,000, which is indexed to average weekly ordinary time earnings. Earnings can still accrue once the cap is reached.
  • In addition, earnings on account balances are taxed at the account provider level at the statutory rate of 15 per cent, rather than in the hands of the individual account holder at their marginal tax rate.
  • As a general rule, in order to access money to purchase a first home, personal contributions of at least $1,000 must have been made in each of at least four financial years.
  • Individual contributions are not taxed as they are made from after-tax income; Government contributions are not taxed and withdrawals to purchase a first home are not taxed.

From 1 October 2008, accounts can be offered by banks, building societies and credit unions, public offer superannuation providers, life insurance companies, and friendly societies.

The Bill also provides a framework to prudentially regulate public offer superannuation providers.

Providers that are banks, building societies and credit unions; and life insurance companies will continue to be prudentially regulated under the Banking Act 1959 and Life Insurance Act 1995 respectively.

The Government is investing around $1.2 billion over four years in the First Home Saver Account policy, including administrative costs.

This is part of a package of measures costing $2.2 billion over four years to boost housing supply and assist those most in need; namely, first home buyers and renters on low and moderate incomes.

Full details of the measures in this Bill are contained in the explanatory memorandum.