Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

I rise to close debate on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. I want to thank all those senators who have participated in the debate. As has been pointed out—and I appreciate Senator Xenophon’s contribution—most of the comments made were made in an earlier debate about the initial bill, which established the parameters of operation of the first home saver accounts. What we are dealing with here is two bills that relate to a range of prudential supervision and administrative operational issues of the first home saver accounts. So—whilst I thank senators for their contributions, which in the broad were very positive—many of the contributions we have heard consist largely of debate that occurred on the earlier piece of legislation, which has already passed the Senate chamber.

I have just a few remarks. Homeownership is important to the wellbeing of Australians, and the first home saver accounts will help Australians to once again realise the dream of homeownership. Briefly, an individual can open an account if they are aged 18 or over and under 65; have not previously purchased or built a first home in which to live; do not have and have not previously had a first home saver account; and provide their tax file number to the provider. Personal contributions can be made by the account holder or another party and can only be made from after-tax income. Individual contributions are not taxed, as they are made from after-tax income. Government contributions are not taxed, and withdrawals to purchase a first home are not taxed.

The account is supported by government contributions. The government will contribute an extra 17 per cent on the first $5,000 of personal contributions made into the account each year, and this will be indexed to average weekly ordinary time earnings. This effectively means that an individual contributing $5,000 will receive a government contribution of $850. There is an overall account balance cap of $75,000, which is indexed to average weekly ordinary earnings. As a general rule, in order to access money to purchase a first home, personal contributions of at least $1,000 must have been made in each of at least four financial years. In addition, earnings on account balances are taxed at the account provider level at the statutory rate of 15 per cent rather than in the hands of the individual account holder at their marginal tax rate. So there are two significant advantages: the tax advantage on the earnings of the account balance and the government contribution of $850 where an individual contributes $5,000, which I referred to earlier.

First home saver accounts recognise that the biggest barrier to homeownership is saving for a deposit, and they provide a tax-effective way for Australians to save through a combination of a 17 per cent government contribution and a low 15 per cent tax rate on earnings. This will allow a couple, each earning an average income and putting aside 10 per cent of their income into an individual first home saver account, to save more than $88,000 after five years. If they were to save in the traditional way—through a bank account, credit union account or building society account—they would not receive the same level of tax concession or government contribution. So effectively they are able to save up to more than $88,000 after five years. This would be $13,000 more than they otherwise would have.

These two bills implement the final parts of the account saving scheme. The bills include a scheme for dealing with unclaimed money, for amendments to secrecy and information sharing between the regulators—the ATO, APRA and ASIC—and for dealing more comprehensively with the interaction between first home saver accounts and family law. The bills also include a framework for imposing a supervisory level to fund the Australian Prudential Regulation Authority’s supervision of each account provider on a user-pays basis.

The finalisation of the schemes by these two bills marks an important new beginning in housing policy in Australia. To update the Senate—I do not think this was known at the time of the initial bill—indications are that at least two of the four banks will be offering the accounts on 1 October 2008 and 16 other ADIs, including a large number of credit unions, have registered with APRA to offer first home saver accounts. These include the New South Wales Teachers Credit Union, with over 150,000 members, and the Defence Force Credit Union, with over 80,000 members. More broadly, this is part of our responsible approach to economic management, as it encourages young Australians to save. The government is investing around $1.2 billion over four years in the first home saver account, including administrative costs.

There is just one other issue I wanted to remark on in concluding the debate. I know it has come up today and during debate on the original bill. That issue is the opposition’s contention that this should be extended to children. What has been created here is a medium-term savings vehicle. Some members of the Liberal opposition may not be aware of this but when they were in government they actually introduced children’s superannuation accounts. Regrettably, this was an absolute flop because, unfortunately, the behavioural response by parents and grandparents with respect to superannuation children’s accounts was that there was very little take-up. I spent a number of question times—