First home savers account ?

Joe Gt

Came across this yesterday on the ato web site , http://www.ato.gov.au/individuals/pathway.aspx?pc=001/002/066

Has anyone have experience with it ?

too good to be true , pay 17% on what you put lodge in a tax year , upto $6000 ,

mel.b

My understanding is that they haven't been very popular due to the restrictions on the accounts. For example -
- must save over 4 (tax) years. What happens if you decide to buy a house in year 2 or 3? you can't get access to the funds until the 4 years is up and then it still has to go into the morgtage or super. (nb there are ways around the four year rule which means you could only have the account open for 2 years and a few days)
- money is not accessible for anything other than the mortagae/deposit or super. If you experience financial hardship such as loosing your job, bad luck.

ballooba

If you buy a house in Australia now, given its economic state and having full knowledge of what's happened in Ireland, you will have no one but yourself to blame if it goes horribly wrong.

Feelgood

ballooba wrote: »

If you buy a house in Australia now, given its economic state and having full knowledge of what's happened in Ireland, you will have no one but yourself to blame if it goes horribly wrong.

I second this, there is a bubble about to burst pretty soon I reckon. Rent in Sydney has started to drop slightly too.

AngryHippie

yeah, but in 2-4 years time, they will be ready to yield, and the property market will have made its move, so now would be a perfect time to start moving money from an online saver account over into the first home saver, and to start regular contributions to the account ?
Not even considering buying in the next 18 months, but the next 4 years is a totally different picture .

ballooba

How many years into the crash are we at now in Ireland and the market is still completely disfunctional? I wouldn't personally try and predict when the crash will come in Australia or how long it will last. I have a small number of Australian equities that are doing well for now, but they are highly liquid and I am eyeing an exit.

Coileach dearg

ballooba wrote: »

How many years into the crash are we at now in Ireland and the market is still completely disfunctional? I wouldn't personally try and predict when the crash will come in Australia or how long it will last. I have a small number of Australian equities that are doing well for now, but they are highly liquid and I am eyeing an exit.

Why does the "crash" (If any) have to be as bad as what went on in Ireland?
We purchased last year and have absolutely no regrets. Even if there's a gradual decline, I'm not too bothered as the market will pick up in a few years anyway.

There is a storm on the horizon but it's not on the scale of the GFC. I do hold my head in my hands when I hear the bank I work for boast "We are the only bank in Australia that can give you a mortgage in 60 minutes".

I'll not hold my breath, not going to mull over the risk I took. Sure if you're going to have that attitude ya might as well not get out of bed in the morning. I left my job at home and took a risk of coming out here about 2 years pre-GFC and I'm not looking back. Plough ahead and take chances, that's how you get places in life.

ballooba

You're nailing your colours to the mast there Coilleach Dearg that you will take full responsibility for any losses you might incur in a crash scenario. You have to be commended for that and I am sure you will grit your teeth through any such losses.

However, your talking of a soft landing is reminiscent of the similar talk in Ireland a short few years ago. It's actually remarkable how market sentiment seems to follow a patterned cycle of emotions in a crash situation. It's very interesting to have such an example so soon after our own.

catbear

There are different inputs into the Aus housing bubble that will give it a different dynamic to Ireland in how it unwinds.
Negative gearing has been a major tax incentive for people to take on second property but it only works while you're working so people heading toward retirement are going to want to sell their negatively geared properties before they retire. Australia demographics suggest that in the near future there is going to be a lot of stock dumped on the market which will depress prices further.
Another factor is how helpful the Aus government is in helping people raid their own Super funds to cover shortfalls in their mortgages.
I've been told in a local branch that banks are very reluctant to foreclose so as to not add yet more stock to the market and are actively rolling over private debt, as long as international investors think Aus is still AAA (like Ireland once was) then the banks can cover the shortfalls on existing debt with the new money coming in from abroad.
Would I use this tax deal mentioned by the OP? Maybe. I think in four years prices should be well down on where they are now so it could be a very good deal. If the government needs to reduce tax breaks and it's obvious that housing is getting cheaper then they'll abolish this scheme.

ballooba

catbear wrote: »

I think in four years prices should be well down on where they are now so it could be a very good deal.

If you were thinking along the same lines in 2007 when our bubble was bursting, and you bought in 2011 in Ireland, would you be happy with the saving you'd made? I certainly know I wouldn't. Of course we have the benefit of hindsight with regard to the Irish market, whereas everything in Australia is in the future and hence unknown.

catbear

ballooba wrote: »

If you were thinking along the same lines in 2007 when our bubble was bursting, and you bought in 2011 in Ireland, would you be happy with the saving you'd made? I certainly know I wouldn't. Of course we have the benefit of hindsight with regard to the Irish market, whereas everything in Australia is in the future and hence unknown.

Why would you be unhappy if you had bought in 2011 rather than 2007 in Ireland? Prices in parts of Ireland are well below 50% of what they were then.
We may not know the future but we have access to information regarding population trends and debt growth and it's irrational to ignore these inputs.
I can understand that if you're personally heavily involved in property that you would say tomorrow never knows and hope for the best but isn't that just kidding yourself?

ballooba

catbear wrote: »

Why would you be unhappy if you had bought in 2011 rather than 2007 in Ireland? Prices in parts of Ireland are well below 50% of what they were then.

Because you didn't hold out until 2012, 2013, 2014.....

Not sure what your latter two paragraphs are referring to.

catbear

The last two lines were in response to you saying

everything in Australia is in the future and hence unknown

I don't agree with that assertion.
Plus you were the one who set the parameters of the Irish house price comparison when you mentioned 2007 versus 2011, prices may continue to fall in Ireland for the next decade but still buying in 2011 was better than buying in 2007.

As a matter of interest Ballooba, what were your thoughts on the Irish property back in 2006. I'm not interested in your retrospective opinion but rather what you actually thought back then.

ballooba

catbear wrote: »

The last two lines were in response to you saying I don't agree with that assertion.

What I was saying is that we can all make predictions, but everything that happens in the future is uncertain. That is pretty much the fundamental root of risk.

catbear wrote: »

Plus you were the one who set the parameters of the Irish house price comparison when you mentioned 2007 versus 2011, prices may continue to fall in Ireland for the next decade but still buying in 2011 was better than buying in 2007.

But not better than buying in 2012, and in my opinion not likely better than buying in 2013 or 2014 for that matter.

catbear wrote: »

As a matter of interest Ballooba, what were your thoughts on the Irish property back in 2006. I'm not interested in your retrospective opinion but rather what you actually thought back then.

I copped on to the problems in late 2007, later than many, but earlier than many too. Importantly it was early enough to save myself. The same can't be said for a huge number of friends who snapped "bargains" between 2008 and 2010.

AngryHippie

The writing was on the wall in Ireland for quite a while. the signs are visible here in the exact same way. The point I'm trying to make is that if I have 10 or 15 grand in the next 12 months that I can definitely save, and potentially the same in the following 12, (providing there is no redundancy issues for me). I would be better off putting it all in an FHS account and getting the higher benefits from that scheme, than keeping it in an online saver (with introductory rates for the first 3 months then rollover into new account). While it is locked in the account for minimum 2 years it is gaining an excellent rate of 17% and at the end of the fixed term I have two options, use it towards a mortgage on my first home or have it placed in my super fund.
If I am in the position of not owning or having bought a home in Aus this is a total no-brainer for me, its got to be done, even if it sits there for 4 years.

I also think that 4 years is a realistic time-frame for property to slide and stabilize or crash and burn, The Irish property market is a completely different beast as there is an over-supply situation, as well as the unemployment problem. The reason the situation is not recovering is down to the overall Eurozone stability, nobody seems to have a clue how to rectify it without shredding the union. This is having a substantial effect on investor confidence.

China is the big danger over here. If it crashes then we're all in deep sh1t down under imo.

ballooba

AngryHippie wrote: »

I have two options, use it towards a mortgage on my first home or have it placed in my super fund.

I didn't realise that was an option. That makes it more attractive, although I am sketchy about my Super's ability to manage funds better than me.

AngryHippie wrote: »

I also think that 4 years is a realistic time-frame for property to slide and stabilize or crash and burn, The Irish property market is a completely different beast as there is an over-supply situation, as well as the unemployment problem. The reason the situation is not recovering is down to the overall Eurozone stability, nobody seems to have a clue how to rectify it without shredding the union. This is having a substantial effect on investor confidence

7 years was a figure thrown around here in the early days of the crash as the average duration of global property crashes. I don't know where that figure comes from or how plausible it is.

I don't know that I agree that Australia's problems are less severe than ours, they just seem different. I think the mining boom is a bit of a myth personally, much like Ireland's FDI was during our bubble. Sure it's there, but it's a small part of the picture. Australia has run a consistent trade deficit for decades. They're borrowing off the back of all that stuff in the ground, but when are they going to start paying back.

AngryHippie

7 years was a figure thrown around here in the early days of the crash as the average duration of global property crashes. I don't know where that figure comes from or how plausible it is.

I'm fairly sure the only derivation from this was the classical 7.7 year boom/bust cycle that existed up until the abolition of the gold standard, since then there has been no way of calculating how a market as complex as a global free market will remain one way or the other. This in itself is part of the problem.

I would foresee that when ever JG/Labour get booted out the days of budget deficit will have to draw to a close. If things in QLD are anything to go by, then the Libs are prepared to take out the knife and trim their won spending to attempt to get back to surplus. Its just a question of how long it will take them to get to power, how radical the changes they can make, and whether they can string a couple of terms together to make it stick.

Campbell Newmans not been popular, but you have to admire the ball$ on the little fella making those calls.

ballooba

AngryHippie wrote: »

I would foresee that when ever JG/Labour get booted out the days of budget deficit will have to draw to a close.

Just to be clear, you know I was talking about a trade deficit?

catbear

I've looked this over and I'm definitely going to set an account up, it's all benefit as far as I can. 17% government annual contribution to whatever ever you put in yourself and no tax on interest, sounds almost like the SSIA all over again. Just got to figure out which super account to transfer the full term amount to if we don't buy into property in 2016.

jockey#1

This sounds very attractive to me too. My issue is I am moving on age wise (only 31) but in 4 years time I would hope to have purchased a home. The good thing about this is you can choose to put it into your super or against your mortgage.

I haven't seen anything on the T&C's but is there any restrictions on this if you are not a permanent resident? I am on a 457 visa but my partner is Australian.

Since I missed on on the SSIA I do not want to miss out again!!!

catbear

jockey#1 wrote: »

This sounds very attractive to me too. My issue is I am moving on age wise (only 31) but in 4 years time I would hope to have purchased a home. The good thing about this is you can choose to put it into your super or against your mortgage.

I haven't seen anything on the T&C's but is there any restrictions on this if you are not a permanent resident? I am on a 457 visa but my partner is Australian.

I'm in the same position myself, 457, hopefully apply for PR next year and am getting on in years making me view this as a great saver. I checked the ATO and their only criteria was that you're a resident for tax purposes so I guess we're covered. I went down to my local Commonwealth bank and they had stopped offering it as they said too many customers found it too constrictive whereas I think it's ideal.

You can't set up a joint account, only individual accounts which is better if you split later on.

I won't be in a position to commit to a house purchase for a few years anyway, work conditions might change in the medium term so better to hold off on big decisions. If we move on from Australia I'd be taking my super any way so it's all the same in the end.

Plus I've being tracking property data in the area I'm interested in and I reckon I'll save a good bit of capital continuing to rent for the next few years.
Just got to find a provider now!

mel.b

catbear wrote: »

I'm in the same position myself, 457, hopefully apply for PR next year and am getting on in years making me view this as a great saver. I checked the ATO and their only criteria was that you're a resident for tax purposes so i guess we're covered. If we move on from Australia I'd be taking my super any way so it's all the same in the end.


Just got to find a provider now!

Be careful with this - you can only withdraw your super if the balance is under $200 or you are a Non-resident. If you are applying for PR then i don't think you would qualify.
http://www.superguide.com.au/accessing-superannuation/accessing-super-early/12-legal-reasons-to-cash-your-super

catbear

Thanks mel, I remember looking up what happens with my super if we leave so I understand there's a lot of conditions and exit taxes to be paid.
Anyway just found that ME bank still offers it on their website so I'll drop into a branch in the next few days to ask those kind of questions. Ideally we really like it here and would like to stay permanently, we just have to be cognisant of work prospects.