Monthly Archives: March 2014

First Home Saver Accounts

If you are saving up to buy your first home, a First Home Saver Account might be just the thing you need to give your savings a boost to help you reach your dream of owning your own home faster!

A First Home Saver Account is a special account where the government will increase your savings by adding 17% of your contributions for the financial year, up to a capped amount. For the 2013-14 year this cap is $6,000 making t
he maximum amount that the government will contribute as $1,020.

There are lots of great benefits of these accounts

  • Free money contributed by the government
  • Make as many or as little deposits as you like each year, up to a maximum amount that the account balance can reach. This cap is $90,000 for 2013-14.
  • The money added by the government is paid in a lump sum once a year, usually around December.
  • You do not need to close the account when you reach the cap, however you can’t make further deposits and so the government contributions cease.
  • Other people such as mum and dad can also make deposits in your account
  • Earn interest on all the money in your account – that’s the money you, your parents and the government put in
  • You don’t have to report the interest on your tax return; the account provider pays the tax on these accounts, but make sure you ask if they are passing this cost onto you.
  • The money in this account is not included in income and assets tests for various government benefits such as family tax benefit
  • You don’t pay any tax on the money when you withdraw it.
  • A first home saver is an individual account, but you can buy a house with a partner whether or not they have a first home saver account.
  • You have a 14-day cooling-off period when you first open your account

There are also some not so great parts about the account which you will need to consider

  • You can’t salary sacrifice payments into your first home saver account.
  • The money that you save can only be used to pay the deposit on a home or land or other costs sustained when you buy or build your first home.
  • You have to keep the money in the account for a minimum period of time currently 4 years.
  • If you lose your eligibility to hold an account, do not buy a house or change your mind you cannot simply close your account, withdraw the money and spend it. The money must be transferred into a superannuation account, unless you are over 60.
  • You can’t make partial withdrawals.
  • You can’t take money out of a first home saver account even if you are experiencing financial hardship.

You need to have contributed at least $1,000 per year to your account in at least four financial years – the four-year rule. You need to be aware that you cannot access this money until you buy or build your first home, but if you are saving for that event then 17% government contributions is a fantastic investment.

Sound good? Wondering how you get one? Well to receive the benefits you must meet the following requirements:-

  • You must be aged 18 to 65 years old when you open the account
  • You must not have owned a house in Australia or Norfolk Island
  • You must be an Australian resident.
  • You must contribute at least $1,000 in four or more financial years
  • You must use your account funds to buy or build a home you will live in for at least six months.
  • You must withdraw all your savings before settling the purchase contract or completing the construction

First Home Saver Accounts were first offered on 1 October 2008, and now in 2014 many financial institutions are no longer offering these accounts. This may be because people are concerned about how locked in their money is, or it may be because they are not aware that the accounts exist. First Home Saver Accounts have fairly strict rules and so won’t be right for everybody, and not all first home saver accounts are the same, so as always before you choose an account, you should read the product disclosure statement provided by the financial institution.

Here is a list of Financial Institutions currently providing First Home Saver Accounts:-

  • AMP Bank Limited – ABN 15 081 596 009
  • Credit Union SA Ltd – ABN 36 087 651 232
  • Hume Building Society Ltd – ABN 85 051 868 556
  • Hunter United Employees’ Credit Union Limited – ABN 68 087 650 182
  • IMB Ltd – ABN 92 087 651 974
  • Members Equity Bank Pty Limited – ABN 56 070 887 679
  • Police Financial Services Limited – ABN 33 087 651 661
  • Railways Credit Union Limited – ABN 91 087 651 090
  • Teachers Mutual Bank Limited – ABN 30 087 650 459
  • The Police Department Employees’ Credit Union Limited – ABN 95 087 650 799
  • Victoria Teachers Limited – ABN 44 087 651 769
  • Wyong Council Credit Union Ltd – ABN 29 087 650 897
  • The Trust Company (Superannuation) Limited – ABN 49 006 421 638

When you buy or build your first home, you can withdraw your saving, close your account, and you will be that much closer to paying your mortgage back and owning your home debt free.

I hope that you have found this information helpful. If you wish to find out more about First Home Saver Accounts, please look at the following links, or contact your financial adviser to discuss the best plan for your circumstances. Best of luck with your saving goals. Content

Should I buy my property as Joint Tenants or Tenants in Common?

When you purchase a property in more than one name, you need to think about whether you wish to take the property as Joint Tenants or Tenants in Common.

This means that each purchaser must decide what they wish to have happen with their share of the property in the event that they were to pass away.

What Does Joint Tenants mean?

“Joint Tenants” means that the person that you purchase the property with has what is known as a right of survivorship. Meaning the deceased persons share in the property would pass straight to the surviving person, not via their will.
Joint Tenants must own the property in equal shares i.e. 50% each. There can be more than two people holding the property in this manner.

What Does Tenants In Common mean?

“Tenants in Common” means that the person that you buy the property with does not have right of survivorship. In this case a deceased persons share in the property would pass according to the terms of their will. If a person dies without a will their estate is distributed according to the Wills, Probate and Administration Act 1898.
Tenants in Common may own the property in whichever percentage of shares that they may chose i.e. 50/50; 60/40 or even 99/1. There can be more than two people holding the property in this manner

For example, if Mr & Mrs Smith are going to purchase a property in 50% shares each, then they need to think about what they want to happen to their share of the property if either of them were to die.

If they choose to buy as Joint Tenants, and Mr Smith was to die, then his 50% share of the property would pass automatically to his wife.

If they chose to buy as Tenants in Common, and Mr Smith died, then his 50% share of the property would be distributed via his will. So if Mr Smith had a child from a previous marriage and he wanted to leave the estate to them, he could do so this way.

If Mr & Mrs Smith chose to take the property as Joint Tenants, and then they break up in the future, the decision is not irreversible, even if they choose to keep the house. They can decide to split their tenancy by writing a letter to the Land Titles Office to say they now wish to hold the property as Tenants in Common. This may happen for example if Mrs Smith is going to remain living in the property with custody of their children, and it is an amicable break up of marriage so Mr Smith is happy to remain as part owner so as not to complicate the financial situation for their family.

You can of course purchase the property with more than two people and choose from a mixture of the above tenancy options to suit your purposes.

It is definitely wise for you and your property partner to really consider what you want to have happen to your share in the property if one of you were to pass away, as this decision is recorded on your Title Deed when you purchase a new property.