FHSA overhaul misses the mark

One of the more cryptic items in the Australian government budget, released on Tuesday, was the change to the conditions of the First Home Saver Account scheme. Ambiguously worded and lacking detail, the brief reference left financial institutions to try, without much success, to find more detail yesterday.

According to the budget overview: "These accounts are being made more flexible by allowing money from the accounts to be paid to an approved mortgage at the end of the minimum qualifying period, if a house is purchased in the interim."

In the original scheme first home buyers had to contribute to their FHSA over four financial years to qualify for concessional tax treatment and government contributions, and could not put the money to a home purchase until after that time had passed.

If they bought a house before the four years was up the money in the FHSA would go into their superannuation account.

Now the government will allow people to buy a home and then put the money saved in the FHSA into the mortgage after the qualifying period has ended.

The government has not changed the four-year qualifying period.

That leaves plenty of questions unanswered. The marketing manager for ME Bank's first home saver account, Bevan Morris, said he contacted the Australian Taxation Office, which administers the scheme, but was not able to get any more details yesterday.

Morris wanted to know whether the new rules would allow the savings in the FHSA to count towards the deposit on the loan and, if so, what mechanism would be put in place to make that happen.

He also wanted to know what lenders would have to do to stop borrowers putting their FHSA savings into their mortgage accounts after the four-year period and then redrawing them.

A banking tax partner at Deloitte, Emanuel Hiou, said the change was unlikely to make FHSAs, which are offered by only a small number of institutions and have not attracted much money, any more popular.

Hiou said that from a financial institution's point of view the product is still complex, requiring a tailored implementation process hard to support with a strong business case.

From a first home buyer's point of view the biggest stumbling block, the four-year qualifying period, was still in place.

Hiou said: "I would be surprised if there was any increase in take-up."