The Federal Government has set up a scheme to provide would-be home owners 17 cents for every dollar they save in special new bank accounts. The scheme will begin from October 1 and is expected to cost around $1.2 billion of taxpayers money over the first 4 years.
To qualify for the scheme participants must make contributions of at least a thousand dollars a year for four years. If they find a suitable property in less than four years, the account balance will be transferred to their superannuation and will not be made available for the purchase. Account holders must be aged between 18 and 65 and the bonus can only be used to buy a home.
Couples can open two separate savings accounts to enable both to be eligible for the scheme.
A First time buyer who saves $5000 a year will be eligible to earn a maximum of $850 per year.
Couples who save $10,000 a year will be eligible to earn $1700 per year, giving them a head start in paying off the house, allowing them to reduce the size of mortgages. First-home buyers must live in the house for at least six months after withdrawing and spending their money.
The ANZ and Commonwealth banks are due to unveil full details of the First Home Savings Accounts, first recognised in May's Federal Budget.
Buyers are not required to contribute every year but will only receive the bonus in the years they do. Account balances are capped at $75,000, including government contributions and interest.
Government contributions are not taxed & interest earned from the account balance is taxed at a special rate of 15%.
The accounts will not be replacing the First Home Owner Grant scheme so home buyers will have to apply separately for the grants.
The Government has estimated that 220,000 people will be opening one of these savings accounts this year alone, this figure is expected to reach 730,000 by 2011, with a balance reaching $6.5 billion.
Federal Treasurer Wayne Swan commented on the new scheme: "Saving a decent deposit for your first home is one of the biggest financial hurdles young Australians face these days, so the Rudd Government's First Home Saver Accounts will be a real help in making the dream of home ownership a reality,".
