The Australian government has not given up on its plan to have contributions to its new first home saver accounts made through salary sacrifice arrangements, despite the difficulty of setting up such a scheme by the planned July start date.The discussion paper released by Treasury last week, outlining the new plan, says salary sacrifice arrangements may be implemented as an additional delivery mechanism at a later stage. The paper says:  "The government invites comment on this possibility."When the first home saver account plan was put forward during the election campaign, the idea was to have the scheme operate as much like superannuation as possible, including allowing account holders to direct pre-tax salary into their accounts by way of salary sacrifice arrangements.Instead, contributions will be made out of post-tax income. To provide an outcome similar to salary sacrifice arrangements the government has come up with a co-contribution scheme.The government will contribute a percentage of the first $5000 saved each year. The percentage will vary according to the individual's marginal tax rate. People on a zero tax rate or a marginal rate of 15 or 30 per cent will be eligible for a government contribution equal to 15 per cent of what they put in.A person saving $5000 or more a year would be eligible for a Government contribution of $750.  People on a 40 per cent marginal tax rate will be eligible for a 25 per cent Government contribution (up to $1250 a year) and people on the 45 per cent marginal rate will be eligible for a 30 per cent government contribution (up to $1000 a year).Interest or income earned on funds in a first home saver account will be taxed at 15 per cent (the same rate as super fund earnings). Capital gains tax discounts and offsets for imputation credits will be taken into account.Funds withdrawn from an account to go to the purchase of a home will be tax free. Penalties will apply to people who misuse the proceeds of their savings.Among the features of first home saver accounts, a minimum contribution of $1000 will be required to open an account and the maximum contribution in any year will be $10,000.The government is considering a $50,000 cap on contributions. Eligibility criteria will be the same as for the first home owners' grant.Banks, building societies, credit unions, life insurers and public offer licensees will be authorised to offer accounts.