INCREASED FLEXIBILITY ON FIRST HOME SAVER ACCOUNTS

The 2010 federal budget included an announcement to allow greater flexibility for the payout of funds from a First Home Saver Account. Previously, no funds could be withdrawn for fours years, and if a home was purchased prior to the four year elapsing, the balance was required to be transferred to a superannuation account. Under the new proposal, the account is still required to be maintained for a four year period, however the balance can be applied against a mortgage rather than being transferred to a superannuation account if a property is purchased before four years has elapsed. The government will still contribute 17% of up to $5,000 individual contributions made each year ($850) and the earnings on the account will be taxed at the concessional 15% tax rate. Any withdrawal from the account is a tax-free payment. These new rules will apply for any home purchases occurring after the date of Royal Assent.