First home saver accounts
Help you save for your first homeIf 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.
Each year the government will make a 17% contribution on the first $5,500 you deposit each year. This means that if you deposit $5,500 in one financial year, you will receive $935 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 $80,000 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 .
- 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.
- building societies
- credit unions
- friendly societies
- life insurance companies
- super funds
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?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 immediately withdraw the money from your account. The money will be transferred to your super and you won't be able to access it until you are retired or can meet another .
Consider all your savings options. You may prefer opening a different kind of savings account that is more flexible than a first home saver account.
Saving with your partnerFirst 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 will only be able to use the funds in your first home saver account to buy a property jointly, if both you and your partner are first home buyers. If one partner has previously owned a home as their main residence, neither of you will be eligible to use funds from a first home saver account to purchase a home.
Case study: Alex and Tony have found their dream homeAlex 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 accountOpening one first home saver account with someone 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 they have saved? If the account is in their name, how will you get your money back?
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.