by Scott Pape - May 11th 2010
Scott Pape’s first take from the 2010 Federal Budget, breaking down the facts for young Aussies, middle Australia and the older generation.
UPDATE:
Since the evening of the budget we have been in contact with the Housing Minister who has confirmed that FHSA holders will be able to use the proceeds to pay down their mortgage after the minimum term has been satisfied (this differs slightly from the video where I stated that you could remove funds from a FHSA before the 4 year period).As I wrote in the Herald Sun on the 15/5/10:
I’ve been hot on First Home Saver Accounts (FHSAs) since they were announced.Here’s why:
Sock five grand away and the government will chip in 17 per cent – and many of these accounts pay market interest of 6 per cent. That’s a 23 per cent return on your money! The cherry on top is that your earnings are taxed at 15 per cent, rather than your marginal tax rate.
The only downside with FHSAs was that you effectively had to lock yourself out of the housing market for four years in order to satisfy the rules. Well, on Tuesday night Wayne Swan announced that the Government would allow you to buy a house before the qualifying period is up, and you can eventually use that money to pay down your mortgage.
Anyone thinking about buying a home would be silly not to open one of these accounts. In an era of sky-high property prices, every dollar you save counts.
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27 comments
Is this Budget good policy from the Labor Government, or is it wishful thinking that the Chinese boom will continue till we are in the black?
When does the changes to the First Home Saver account kick in? Can we open an account tomorrow?
Re: The 50% tax cut from income from intrest.
Does it extend to managed funds also? I realise it covers bonds etc… but is it everything in investments?
Yes, capital gains tax works in the same way, as long as you hold an asset over 12 months.
They got it last year!
FHSA are already up and running, will check with the housing Minister when the changes take place.
Agreed. The budget will be back in surplus – but net debt (public, private, household) stands at $647 billion.
It's all finance at my place. It wears a little thin after a while.
Awesome thx! also a quick thank u for eleviating my finance newb-ness!
P.S. Did you come to a decision on your product recomendation quandry?
Does U bank offer FHSA?
Does U bank Offer FHSA?
I'm really looking into getting a first home saver account too, should I do this ASAP or wait until the government have cleared it and more information regarding the new guidelines have been published?
Hey Scotty!!
Great analysis as always!!
Quick question. Reckon the First Home Saver accounts are gold and want to chuck some cash in one with these new changes. However, already got a small investment apartment. Do you think I will still be eligible???
Cheers
hey scott,
I can see your a big proponent of FHSA and with these changes are a much better option available for my own personal finance (as i will probably some day buy a house, sooner or latter, and can afford $200 a fortnight to get the best deal).
I guess my problem with the whole scheme is it has to be real estate and seems to be still about me being a 'greater fool' than previous generations and keeping the bubble going for another 10 years. It does not seem to be to giving me as a gen y a genuine chance at financial security going forward but to supply boomers their retirement money.
Having an extra $4000 after 4 years isn't going to make much of a difference if house prices are then $700,000 or so. There doesn't seem to be any genuine plan by the government to actually make houses more affordable which of course means lowering the price.
Thanks Scott, an easy-to-understand breakdown. Wish there were more tax cuts but oh well….. (Sorry, I know this isn't a pet blog but…Buffett is gorgeous!!!)
Just like to point out that the saying is “the goose that laid the golden eggs” – therefore there is no such thing as a golden goose. Semantics maybe? but we are getting too lazy with our language
But encouraging a savings, rather than a spending culture, perhaps will.
Cheers PhilR!! Appreciated mate!!
Thanks B.I.
HI Scott, have money saved sitting in a term deposit at present but am wondering should I open up a FHSA and throw some money in just to get the govt contribution. We don't own a home so are eligible and not sure whether we want to buy just yet or keep renting for a couple more years. (waiting to see if any little bubble may burst la di da etc…) We currently live remote and will be relocating back to Cairns in a year or two.
hi Scott,
kind of unrelated to the budget, but i remember you (or some other brain) writing somewhere that capital garuantee was like an expensive 'put' option.
I was hoping one day you could get the chance to cover this in more detail.
i was thinking a 'put' with small cap stocks would be a good idea. but don't know pro's and cons.
if you get a chance i'd really appreciate it, or you could open your forum and i can i ask your helpful visitors.
thanks.
hwy scott, have you checked when the changes take place?? if we open an account now will the changes apply or do we have to wait? i want to open an account before the end of this financial year if possible! thanks!
I think the problem is that you would miss out on the government contribution if you took your money out in July 2012 i.e. you make your final deposit in July 2012 which is your fourth financial year however you need to wait until you do your tax return for financial year ending June 2013 to get the final contribution of $850 into your account.
Hi Scott,
My partner and I have about $75k in savings, looking to buy in approx 2 years. I think we might open 2 FHSA's to pay into the mortgage when eligible. Does the FHSA count towards a deposit? i.e should I add more than the $5k to each or do I need to keep enough in savings for a deposit?
Thanks in advance
Hi Scott,
would the fhsa be an effective way to salary sacrifice for someone not earning enough income to do the normal salary sacrificing? it's basically a co contribution from the government, either towards your first home or super fund.
Hey Yeah really need to know when these new rules are takin place..time is runnin out like old mate i also want to open my fhsa before this financial year ends so i feel safer that its only like 2 years and like a month after july 2012. For sure more people need to catch on about this time limit Scott maybe you should let em know on your show. Please please please can u find out for sure if after the account is opened if the new changes come in place will they apply on the already opened account????? Or does anyone know when they decide asked the ATO but they didnt know….(sorry if thats a stupid question) im not really up with it all.
Love your work scott you make it sooo much easier to understand all this stuff.
Scott,
With a week to go until 30th June, i'm keen to get in on a FHSA this financial year. Only thing is i'm not sure about the wording “…a minimum qualifying period” mentioned in the proposed changes to the Budget and FHSA in this press release: http://www.treasurer.gov.au/DisplayDocs.aspx?do...
If they're talking about still keeping FHSA's locked down for 4 years then it's not for me, considering i'm keen to buy long before then and that i'd effectively be locking my deposit money away!
Any chance you could get in contact with the Housing Minister and confirm how long the proposed qualifying period will actually be?
Cheers,
Simon