First Home Saver Accounts - Consultation Paper
This chapter describes when and how amounts can be withdrawn from a First Home Saver Account.
First Home Saver Accounts are intended to encourage saving for either a first home or for retirement. Thus, withdrawals will be permitted for the purpose of purchasing or building a first home for the account holder to live in. Where an account holder requests a withdrawal for this purpose, they will be required to withdraw the full amount in their First Home Saver Account and the account will be closed. The account holder will not be able to open further accounts.
If the account holder does not purchase a first home, then the balance of the account will be transferred into superannuation.
Account holders will need to lodge an application for withdrawal with their account provider. The Government will introduce a standard form to facilitate the withdrawal of funds.
Funds need to be withdrawn before the sale or contract to build a first home is finalised. Amounts cannot be withdrawn for a first home that has already been purchased or built by the account holder. If the account provider is satisfied that the applicant meets the eligibility criteria, the payment can be made to the account holder or as directed by the account holder.
If it is subsequently determined that the account holder incorrectly certified as to their eligibility for withdrawal, or that the account holder did not meet the conditions regarding occupancy and use of the home that apply (see 4.1.2 below), then the account holder will be liable to repay the Government contribution and penalties, including criminal penalties if applicable, will apply.
4.1.2 Determining eligibility for withdrawals
An account holder will be eligible to withdraw funds from their account for purchasing or building a first home where the account holder meets the eligibility criteria set out below.
- Contributions of at least $1,000 must have been made into the account in each of four or more years. The four-year qualifying period starts from the financial year in which the account was opened.
- If the provider is advised that the account holder is purchasing a first home with another individual (or individuals), the account provider may release the balance even if the four-year condition has not been met if they are satisfied the other individual(s) meets that condition in respect of their own account. Processes will need to be developed to allow providers to transfer this information.
- The withdrawal must be for the purpose of making a payment directly necessary to purchase a first home. This will include the payment of a deposit and, in the case of the building of a first home, payment due on signing of the contract to build. Where the withdrawal is for the purchase of land only, it must be a condition of the land purchase that a building contract be entered into within six months.
- The account holder must not have previously bought or built a first home to live in (they will still be eligible if they have previously purchased an investment property or block of land).
- The home is, or will be, located in Australia and will be a new or established house, home unit, flat or other type of self-contained dwelling that lawfully can be used as a place of residence.
These standard criteria will apply to all individuals regardless of the State or Territory in which they reside.
If the account holder has previously contributed to the mortgage of a home they will still be eligible, provided they were not listed as an owner on the property title.
Where an individual was a resident for taxation purposes when they opened their account, but subsequently became a non-resident, they will not be required to close their account. Individual contributions will be permitted while they are a non-resident, however they will not be eligible for a Government contribution during this time. The individual will be eligible for a Government contribution when they again become a resident for taxation purposes.
An individual will not need to be a resident when they withdraw funds from their account. It is open, therefore, for an individual to purchase a first home in Australia while they are non-resident with the intention of returning to Australia to reside in the home.
Conditions relating to use of the home
There will also be conditions for occupation of the home, ensuring that the purchase is for the purpose of a home for the account holder to live in and not for other purposes, such as an investment property.
The account holder will be required to live in the home for a continuous period of 6 months commencing within 12 months of settlement or completion of construction. This will ensure that those individuals accessing their accounts reside in Australia after buying the house.
If these conditions are not satisfied, the account holder will be liable to repay any Government contributions, and penalties, including criminal penalties if applicable, will apply. However, a refund of Government contributions or other penalties may not apply in certain circumstances (for example, if the home was not occupied due to extenuating circumstances such as divorce or military deployment overseas).
Use of money
Funds will be released from an account to assist in the purchase of an eligible first home, including payment of the deposit, stamp duty, legal fees and other settlement monies.
In consultation with industry, the Government will consider ways in which auction arrangements can be accommodated to address any delay in being able to access funds from an individual’s account.
The Government recognises that the circumstances of an account holder may change over the life of the account. As such, individuals will be allowed to contribute the balance of their account to superannuation at any time. The entire balance will be required to be contributed, and the account will then be closed, meaning individuals who do so will not be eligible to open another account.
Where amounts are contributed to superannuation, they will be assessed against the non-concessional contributions cap.
The non-concessional contributions cap limits the amount of non-concessional contributions a person can make (or receive) in superannuation to $150,000 per year. To accommodate larger payments, people under age 65 are allowed to bring forward future entitlements of two years worth of contributions. This means a person under age 65 is able to contribute $450,000 over three financial years without exceeding their non-concessional contributions cap.
Individuals will not be eligible to receive the superannuation co-contribution on amounts contributed to superannuation from a First Home Saver Account.
Amounts contributed to superannuation will be preserved in the fund until a condition of release has been met. These conditions are subject to the governing rules of the fund and may include retirement, financial hardship, compassionate grounds or terminal illness.
4.2.1 Early release provisions
By contributing the balance of their First Home Saver Account to superannuation, individuals may apply to the superannuation fund to access their funds in cases of severe financial hardship and terminal illness, and on compassionate grounds, under the superannuation early release provisions. This application will be subject to the governing rules of the fund.
In order to do so, the individual must close their First Home Saver Account.
4.2.2 Reaching age 60
An individual who has an account at age 60 will be able to contribute their account balance to superannuation and then access their funds tax free in accordance with the payment of superannuation benefits. This provides consistent treatment with the taxation of superannuation from age 60 for most individuals.
Where a fraudulent withdrawal has been made or where the ATO has closed an account because the individual is ineligible to hold an account, the account holder will be liable to repay any Government contributions received and penalties, including criminal penalties if applicable, will apply.
Any withdrawal or contribution to superannuation will be required to be the full amount of the account balance and the account will be required to be closed. The account provider will need to report the closure to the ATO and the account holder.
In some circumstances, the ATO may direct the account provider to make an account inactive or to close an account. This could occur where the ATO has identified that the account holder was ineligible to open an account. Where an account is closed in such circumstances, the account holder will be liable to repay any Government contributions received and penalties, including criminal penalties if applicable, will apply.
4.4.1 Reaching age 65
The account will be required to be closed and the balance transferred into superannuation within 30 days after reaching age 65. After age 65, individuals are required to satisfy a work test before contributing money to superannuation. The work test will be suspended for 30 days after an individual reaches age 65 to allow this.
4.4.2 Ceasing to be eligible for an account
Where an individual’s eligibility for the account changes, the individual will need to inform their account provider, roll their balance into superannuation and close the account. Penalties will apply if the account provider is not informed within 30 days of the change in eligibility.
If the account holder dies, the account balance will be transferred into superannuation and treated as part of the superannuation benefit.
In the event of the bankruptcy of an individual with a First Home Saver Account, the balance will be treated in the same way as if they had been saved in an ordinary savings account.
4.5.3 Relationship breakdown
In the event of a relationship breakdown, the account will be treated in the same way as superannuation.