Government Savings Account

Taxes from the government may be one of the certainties of life, but your savings can also benefit from government incentives, specialised savings accounts and broader savings options available to you at any stage of your life. If you have funds in a high interest savings account, the Australian Government will guarantee their safety until 2011, if you are saving for your first home the government will chip in, and if you’re saving for, or managing, your retirement the government can help there too.

Government Guaranteed Savings Account Deposits

After the global financial crisis people around the world lost the money they were saving in banks and financial institutions, and to ward off a mass exodus from Australian banks, the government promised to guarantee all deposits up to $1 million, until October 2011, a total of three years.

The government’s deposits scheme:

• All deposits in Australian banks, credit unions, building societies and financial institutions are eligible for the guarantee. All eligible Australian financial institutions will advise you of the fact that your deposits with them are eligible for the government guarantee and just about every Australian savings account is eligible to be guaranteed, if you’re unsure, send off a quick enquiry to the bank.
• Deposits up to $1 million are guaranteed for free. The Australian Government will guarantee all deposits up to $1 million for free, and deposits over $1 million will incur a fee which is calculated on the credit rating of the bank. Some banks are also offering free guarantees for amounts over $1 million because they feel their institution is secure, but this is not a feature of all online savers.
• The deposit scheme was announced on 12 October 2008 and will expire on 12 October 2011. When the deposit scheme was announced after the GFC in 2008, the government promised to guarantee all deposits for three years at least, with no cap, the scheme may be revised or extended in 2011.
  Funds in retirement savings accounts and super savings accounts are protected under the deposit scheme.

First Home Saver Accounts

Saving for your first home can be hard work, however, new homes stimulate the economy, create jobs and create more revenue for the government from rates and taxes, so the Australian Government is helping first home buyers with tax breaks and contributions.

First home saver account benefits:

• You only need a deposit of $1,000 to open a first home saver account.
• Everything you earn on top of your contributions is tax free. You don’t have to report the government contributions or the interest earned on your tax return. These returns are still taxed at 15%, but this is paid by the financial institution which holds your account.
• You must have a first home buyer savings account for four financial years, after which you can withdraw the funds tax free.
• You can grow your home saver account yourself too by setting up a regular transfer from your transaction account, and you can make unlimited deposits until your balance reaches $85,000.
• You can potentially earn up to $850 from government contributions. The Australian Government will contribute 17% on the first $5,000 you save each financial year.
• First home saver account providers offer a high interest rate, which is often much higher than their standard high interest savings account rates.

Superannuation Co-contributions

Depending on your earnings, the government will match your personal contributions to your retirement funds, with their own co-contributions, up to as much as one dollar from the government for every dollar you contribute.

How super co-contributions work:

• Your superannuation must be in an eligible super fund, self-managed super fund or super saver account.
• Australians who are self-employed and making personal contributions are also eligible for co-contributions from the government.
• All personal contributions to your super fund up to $1,000 in a financial year can be eligible for government co-contributions.
• The amount of the government co-contribution depends on your yearly wage and if you earn $31,920 or less the government will match your contribution dollar for dollar, up to the value of $1,000.

While it may seem that a too-large portion of your wages goes to the government each payday, there are ways you can get some of it back and they are available to just about every Australian, regardless of your income, your age or your financial situation. Find out more about the savings accounts eligible for the deposit scheme, and those which can be used as self-managed superannuation funds in the Savings Account Finder™ comparison tables here.