First Home Buyers Savings Account

Rates and Fees verified correct on December 23rd, 2014

Choose the right savings account and get into your home earlier

Saving for your first home is a challenging task for many, so the Australian Government has from time to time offered assistance to first home buyers in the guise of first home owner grants to assist in buying or building a home (which are still at the time of writing available), and a first home buyers savings account which was designed specifically to help by offering government contributions and tax breaks on your savings. Unfortunately the First Home Saver Account (FHSA) was abolished during the 2014-15 Federal Budget, but there are still a range of high interest savings accounts which can be compared to help you save a deposit for a home.
Rates last updated December 23rd, 2014
Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit
ING DIRECT Savings Maximiser
Earn 4.00% p.a. when you open an Orange Everyday Account and deposit at least $1,000 into it each month from an external bank account.
4.00% 2.75% $0 $0 / $0 Open More
ME Bank Online Savings Account
Earn 4.10% p.a. for 4 months on balances up to $250,000 when linked to a ME Bank Everyday Transaction Account within the first 14 days.
4.10% 2.75% 1.35% $0 $0 / $0 Open More
Bankwest Hero Saver
Earn an ongoing variable interest rate of 4.00% p.a. when you make a minimum monthly deposit of at least $200 and don't withdraw. No monthly fees. Available on balances up to $250k.
4.00% 0.01% $0 $0 / $0 Open More
HSBC Serious Saver
Earn 4.00% p.a. variable interest rate for the first 4 months when you don't make a withdrawal.
4.00% 2.70% 1.30% $0 $0 / $0 Open More
ANZ Online Saver
Access your funds 24/7, no minimum balance and earn up to 3.60% p.a. Online offer exclusive.
3.60% 2.50% 1.10% $0 $0 / $0 Open More
Westpac eSaver
Earn 3.71% p.a. variable rate for intro period 3 months with no minimum balance and no monthly service fee.
3.71% 2.50% 1.21% $0 $0 / $0 Open More


Important changes to the FHSA


As mentioned above, the FHSA has been abolished. Those who already have an FHSA will continue to receive the government bonuses for the 2013-14 financial year and will receive tax and social security concessions for the 2014-15 income years. There are also some other important points:

  • Any new accounts opened after 7:30 pm 13th May 2014 won't be eligible to access government contributions or tax savings.
  • Withdrawal restrictions will be abolished from 1 July 2015
  • From 1 July 2015 FHSAs will be treated like any other savings account

What was a First Home Saver Account?

FHSA cutting red tape

The First Home Saver Account was an account backed by a Federal Government scheme put in place late 2008 to help first time buyers save for a home by giving government contributions and low taxes for savings towards a home. FHSAs were only offered through selected banks, credit unions and building societies and others that offered the accounts. These accounts came with stringent conditions which partly explained the low uptake. They offered contributions which were made in return for meeting criteria including:

  1. Depositing at least $1,000 per financial year for at least four financial years before you could access your money. These years didn't need to be consecutive.
  2. Using the money only to purchase a home. Failure to use the funds in the account for your home meant they would be transferred to your super account to be accessed when you retire or meet a condition for release.

There were also other features of this account Australians had to be weary of, including:

  1. The maximum amount you could hold in an FHSA was $90,000, but this was indexed.
  2. If you purchased a home before the four years was up, you could still put the money in your FHSA towards your home, but you'd still need to wait the four years until you could do this.
  3. Account holders were only charged a tax rate of 15% on the interest earned in an FHSA.

Pros:

  • Government contributed 17% of the first $6,000 deposited each financial year. This equated to $1,020 of free money
  • Interest was only taxed at 15%, instead of the marginal income tax rate
  • Family, employers and friends could all contribute after tax income to your FHSA
  • Maximum government contribution and balance caps were periodically increased (indexed upwards)

Cons:

  • Savings were locked in your account for a minimum of four financial years. You'd have to deposit at least $1000 over four financial years and use the balance for a deposit on a house.
  • Interest rate was usually lower than online savings accounts
  • Max balance was capped at $90,000. This is a 20% deposit on a $450,000 property
  • Joint accounts weren’t permitted
  • Low availability of FHSA providers

Features and Benefits of the First Home Buyers Savings Account

A first home saver account is similar to a term deposit account in that you were required to leave your funds in the account for a certain length of time, and when the term ended, you had to withdraw the entire amount and close the account. Other features which benefited first home buyers:

  • Government contributions and interest earned were tax free and you didn't have to report them on your tax return; the earnings from your first home buyers savings account were still taxed at 15%, but this tax was paid by the account provider. Any government contributions and interest earned didn't affect any pensions you received from Centrelink either.
  • You could make personal contributions at any time from your wages by setting up a regular transfer, or through bulk deposits from your tax refund or money from an inheritance.
  • You could still be eligible for the first home owner grant, but you had to apply for the grant in a separate application.
  • Family members or friends could contribute funds to your first home buyers savings account too to help you along.
  • You had a 14 day cooling off period which allowed you to withdraw your personal contributions and close the account if you changed your mind, while still being eligible to open a new first home saver account in the future.
  • If you closed the account outside of the 14 day cooling off period, savers over 60 years old received their funds back, while those under 60 had the funds transferred to their nominated superannuation account.
  • The Australian government will make a 17% contribution on the first $6,000 you deposit each year. This means that if you deposit $6,000 in one financial year, you will receive $1,020 from the government.
  • The financial institution offering the account will also offer you a high interest rate, generally higher than their standard high interest savings account rates.

First Home Savings Accounts were available at:

  • AMP
  • Credit Union SA
  • Hume Building Society
  • Hunter United Employees Credit Union
  • IMB
  • ME Bank
  • Police Bank
  • Police Credit
  • Railways Credit Union
  • Teachers Mutual Bank
  • Victoria Teachers Mutual Bank
  • Wyong Shire Credit Union
online comparisons of First Home Savers

Using a high interest savings account to save a deposit

High interest savings accounts (HISAs) and term deposits can be used to save a deposit in the place of FHSAs. A high interest savings account has a number of benefits when compared to a FHSA, including:

  • Time requirement. High interest savings accounts have no time requirement to be able to access your funds unless the account is a notice saver. This means you can save for any period of time, and get access to your funds as soon as you find a property and secure a home loan.
  • Bonus interest conditions. Some HISAs require you to make a minimum deposit each month or make no withdrawals to earn a high interest rate. This can encourage you to save and not use your funds for other purposes.
  • You want the ability to access your money in an emergency. Along the way to your goal of owning a home you may run into emergencies where you need access to your savings. A high interest savings account allows you to get access to your funds without any significant delay - if your transaction account is linked to it you might be able to get access to your funds instantly.
  • You want to be able to use your money for a different investment. A lot can change in four years, including your investment preferences. If you want to invest in shares rather than property for example, funds in your HISA can still be used.

Case Study


Julia is saving up for her first home. After some research she sets herself a target of $40,000 to be read to purchase a home in two years, and starts researching accounts. Because she's starting with $0, she can't open a term deposit as she has no money to invest, so she opts for a high interest savings account.

There are a number of different accounts available, including notice savers, high interest savings accounts with bonus interest for the first few months of opening an account and high interest savings accounts with ongoing bonus interest given in exchange for regular deposits.

Julia opts for a high interest savings account which rewards her with bonus interest in return for making at least $200 in deposits each month. This encourages her to save, as failing to put money into her account will mean she won't interest for the month.

Julia's account has an interest rate of 4%, so she uses a savings calculator and works out that she'll need to save a minimum of $1,600 per month to reach her target of $40,000 in two years.

Using a savings calculator when saving up a deposit

Picking the right HISA

Selecting the right savings account has a number of steps which are best gone into in depth, but here are a few quick tips to keep in mind.

  1. Don’t pay fees. Many competitive savings accounts have no bank fees, so don’t get sucked into paying bank fees for an account because the advertising tells you it’s special.
  2. Take advantage of bonus interest. Many HISAs today offer a bonus interest rate for a short period of time (usually a number of months). When this bonus interest rate ends, move your savings into a new HISA account from another bank and take advantage of their bonus interest rates. There’s no fees associated with this, and no limits to the number of HISAs you can have.

Realising your dream to own a home and reach financial independence can be that much easier with the right bank account backing you up. Start comparing today.

To compare the high interest savings accounts which can be used as first home saver accounts, view the Savings Account Finder™ comparison tables here, and follow our secure links to find out more about each providers' accounts and services.

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This page was last modified on 21 October 2014 at 15:12.

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29 Responses to First Home Buyers Savings Account

  1. Default Gravatar
    Amz | September 1, 2014

    Hi there! Apologies if this has been asked already.
    I have a FHSA and meet the requirements for applying for release (4 years + etc.). I haven’t yet however applied to have it released.
    I am looking to place an offer on my first property. I would like to use the funds saved within my FHSA to be my 5% holding deposit – is this possible whilst it is still in the account? Thanks

    • Staff
      Shirley | September 2, 2014

      Hi Amz,

      Thanks for your question.

      On the ATO website it states that, “You must notify your account provider that you have purchased a home within 30 days of it becoming your main residence, unless you have already notified them to withdraw your funds and close your account.”

      The situation depends on what the seller is willing to do. If they’re happy to accept your offer and wait 30 days for the funds to come out of your FHSA, then you may want to proceed with the contract. I’d recommend that you work closely with the real estate agent, so the seller knows your situation.

      Cheers,
      Shirley

  2. Default Gravatar
    jayme | April 12, 2014

    If you didn’t close the account and you reached the $90,000 cap, how much would you get in government contributions in total?

    • Staff
      Marc | April 14, 2014

      Hi Jayme,
      thanks for the question.

      Provided you fulfilled the conditions, you would receive a total of $1,020 per year in government contributions until you reached this cap. This means that depending on how much you were saving per year, the amount of government contributions you’d receive would change.

      I hope this helps,
      Marc.

  3. Default Gravatar
    Peta | February 18, 2014

    does having this acc. effect the first home buyers grant? can you receive both or is it just one?

    • Staff
      Marc | February 19, 2014

      Hi Peta,
      thanks for the comment.

      Opening an FHSA doesn’t make you ineligible for the First Home Buyers Grant – you can use both of these when purchasing your first home, provided you fulfil the eligibility requirements listed for both.

      Cheers,
      Marc.

  4. Default Gravatar
    Harry | February 7, 2014

    Hi There,

    We plan to open 2 accounts one on my name and one on my wife’s name. Can both of us get govt benefit? we will register the house on both our names that’s not a problem.

    Thanks,
    Harry

    • Staff
      Marc | February 7, 2014

      Hi Harry,
      thanks for the question.

      This is perfectly fine. As long as you fulfil the eligibility requirements each buyer can open an first home savers account.

      I hope this helps,
      Marc.

  5. Default Gravatar
    grace | January 10, 2014

    If I want to buy a house at the second year, do I have to withdraw the balance with the new rule of abolishing the 4 year rule.

    Or do I have the choice of keep contributing $6000 a year until the 4th year to get the government contribution.

    If so, does the government stop contribute at the 4th year because I bought a house within 4 years?

    Many thanks

    • Staff
      Shirley | January 13, 2014

      Hi Grace,

      Thanks for your comment.

      We can’t find any reference that the 4 year rule has been abolished. The MoneySmart website states that “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.”

      The Government will make a contribution each year, you don’t need to wait until the 4th year for the Government to make one. The Government contributes on the first $6,000 you deposit each year.

      Cheers,
      Shirley

  6. Default Gravatar
    Loren | September 14, 2013

    I am not sure if I am just reading too many sources but can you clarify…
    My partner and I are hoping to purchase a home anywhere between 2-5 years, depending on how much we are able to save. If we buy before the 4 years are up, can we use this saved money towards the deposit? Thanks

    • Staff
      Shirley | September 16, 2013

      Hi Loren,

      Thanks for your comment.

      I’ve taken this from the MoneySmart website – “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”.

      Hope this helps,
      Shirley

    • Default Gravatar
      Jason | September 17, 2013

      Hi Loren

      I would definitely recommend against opening a First Home Savers account. I have one at the moment and the deteriments far outweigh the benefits unless you really don’t intend to buy a home in the next 4 years.

      If you purchase a home before the 4 years are up, the financial institution freezes your account from any additional deposits and then once you have reached 4 financial years, the balance will be direct debited into your loan.

      Reasons why this is bad:
      I opened an account and have $21,000 locked away in it until 1 July, 2015.

      I just purchased my first home for $445,000 with a 10% deposit of $45,000 instead of $66,000 all up.

      This resulted in me having to pay $8600 in mortage insurance instead of $4600 if I could tap into these funds and a less competitive interest rate.

      Also, the interest incurred from less of a deposit far outweighs the interest earned from this account.

  7. Default Gravatar
    Patricia | June 21, 2013

    Hi
    Im really confused now. I read before that if somebody is eligable to open a first home buyers account then can use the money after 4 years. It doesnt matter if you are buying the property with a partner that owned a house before as long as this is the first property for YOU (the account holder)and your name is in the contract.
    But you are saying here that if you are buying with a partner both have to be first time home buyers?? both have to have the first time buyer account? is that correct?
    Thanks in advance for your answer.

    • Staff
      Shirley | June 24, 2013

      Hi Patricia,

      Thanks for your comment.

      This has been taken directly from the ATO website.

      You can close your account and withdraw the balance to build or buy your home if one of the following applies:
      You contributed at least $1,000 per year to your account in at least four financial years – the four-year rule.
      Your account balance has reached the cap and you have held the account for at least four years.
      You are building or purchasing a home with another first home saver account holder who is eligible to access their funds.
      You have a mortgage and have built or bought your home before meeting the four-year rule but you have now met your minimum qualifying period (for homes purchased after 25 May 2011).
      You have turned 60 years of age.

      Please note the bolded text, you are required to be building or purchasing with another first home saver account holder.

      Hope this helps,
      Shirley

  8. Default Gravatar
    Michael | June 16, 2013

    If my partner owns a property and I do not am I still eligable for this and would I also still be eligible for the first home buyers grant?

    • Staff
      Shirley | June 17, 2013

      Hi Michael,

      Thanks for your comment.

      Please check here if you’re eligible for a FHSA. Keep in mind that when you access the funds of the FHSA you need to be building or purchasing a home with another first home saver account holder who is eligible to access their funds.

      For the FHOG, eligibility requirements will depend on which state you live in. Please see this page for VIC requirements.

      Cheers,
      Shirley

  9. Default Gravatar
    Kien | June 14, 2013

    Hi,

    Thanks. Very interesting read. I have a few quick questions

    1. As Valerie pointed out about the residency status requirements. There’s no mention of it so I’m assuming it doesn’t matter if you are on your TR visa or PR or citizenship. Please let me know if I’m wrong.

    2. Can I open one account and my partner open her account, and then we use the money from both accounts to purchase the same house?

    Thanks

    • Staff
      Shirley | June 17, 2013

      Hi Klen,

      Thanks for your comment.

      There are few residency requirements; you need be an Australian resident for income tax purposes (for at least part of the financial year) to receive the government contribution and live in the home you buy for at least six months within 12 months of becoming the owner or construction being complete.

      You can open one account and your partner open another – you need to be building or purchasing a home with another first home saver account holder who is eligible to access their funds.

      Cheers,
      Shirley

  10. Default Gravatar
    Jason | May 30, 2013

    hi,

    i’m just wondering it says for a minimum of 4 years, will the government keep contributing if you complete 5,6 7 years etc?

    • Staff
      Shirley | May 31, 2013

      Hi Jason,

      Thanks for your comment.

      There is a cap to how much Governments can contribute to. In 2013, the maximum government contribution threshold is $1,020.

      Cheers,
      Shirley

  11. Default Gravatar
    Mick | May 17, 2013

    The info is a little outdated.
    The gov’t will now contribute 17% on the first $6,000 you save each financial year, so you have the ability to earn an extra $1020 a year in government contributions.

    My question is, Who provides these accounts now? The big banks cut them a while back and now just a few building societies and others offer them….. I know AMP do, but not sure who else. List?

    Thanks

    • Staff
      Shirley | May 17, 2013

      Hi Mick,

      Thanks for your comment. The information has now been updated to reflect this.

      As well as AMP, ME Bank and the Police Bank offer first home saver accounts as well.

      Cheers,
      Shirley

  12. Default Gravatar
    Valerie | May 8, 2013

    Hi there,

    I cant find anywhere what residency status you have to be on when you apply for a first home saver account.
    Do you have a quick answer for me?

    thank you
    Valerie

    • Staff
      Shirley | May 10, 2013

      Hi Valerie,

      Thanks for your comment.

      This page contains all the information about the eligibility of a FHSA.

      Hope this helps,
      Shirley

  13. Default Gravatar
    Jenny | April 3, 2013

    Hi

    I am confused about ING’s bonus interest rate p.a.
    On the table it says 1.75% but in the page which was taken by click the variable bonus rate is 0.75%.
    I understood after 4 months the ING’s interest rate is 3.25+1.75 = 5%, but where does 0.75% need?

    • Staff
      Shirley | April 5, 2013

      Hi Jenny,

      The loyalty bonus applies after the promotional period (4 months), so when you open it, you get the maximum interest for 4 months and then after that 4 months it goes to the bonus standard rate but only if you deposit $200 a month. If you don’t deposit up to $200 a month, it reverts back to the standard variable rate.

      Hope this clears things up,
      Shirley

  14. Default Gravatar
    Treezie | December 16, 2012

    Hello,

    If I start a first home owner savings account and then become ready to buy my first home before the four years is up, am I able to withdraw the money early and use it on the deposit? Or, if not, can I purchase the home and then use the money in the savings account to go towards the mortgage after the four years is up?

    Basically, I think I’ll be ready to buy my first home in a year or two and am wondering if I can still use this account to my advantage.

    Cheers,

    Treezie

    • Staff
      Adrian | December 17, 2012

      Hi Treezie. My understanding of First Home Saver Accounts is that the balance cannot be used towards a deposit for a home if the full four years of contributions have not occurred. In this circumstance, the balance can be used towards repayments but not a deposit. All the best with this decision.

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