Stirling, Western Australia -- (ReleaseWire) -- 06/30/2014 -- The Abbott government officially decided to remove the First Home Saver Accounts scheme from its 2014 budget. The decision was made due to low initial interest from consumers. Only 46,000 accounts were opened in total by the end of 2013.
The balance across all the accounts exceeded $520 million.
President Peter Bushby of the Real Estate Institute of Australia (REIA) remarked that he was disappointed with the decision to scrap this scheme instead of simply reviewing and improving upon it.
“With homeownership in Australia declining and first home buyers finding it increasing difficult to enter the housing market, this will not help the situation,” he stated.
Advice for First Home Saver Account Owners
This recent budgetary change proved to be confusing for current account owners who are unsure what will happen to their accounts. Previously, savers who opened these first home owner accounts and deposited at least $6,000 would receive a government up to $1,020. They also received tax concessions.
The scheme was designed so that money could only be withdrawn when savers were ready to pay for their first home. Savers must understand the new rules to decide what to do with the money in their accounts.
New Account Regulations
First home saver accounts will completely cease to exist starting on July 1, 2015. Current account owners will still be able to withdraw their money after that date. Current account owners can still earn government co-contributions on deposits, but only until this July.
Anyone planning to open a First Home Saver Account after May 13, 2014 will be ineligible for the government money or tax concessions. After July 1, 2015, there will be no more tax concessions at all. Until that time, the tax rate on any interest earned in the saver account will be 15 per cent.
Treasurer Joe Hockey clarified that after the abolition of the scheme, the First Home Saver Accounts would be treated like any other account.
First Home Ownership
Even if there are no longer accounts specifically for first time home owners, there are plenty of other ways for first time buyers to finance their homes. Government grants and stamp duty concessions vary from state to state. The first step is savings, whether or not that savings is backed by government contributions.
Prospective first time home buyers must carefully understand their financing options before purchasing their dream home.
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