First Home Saver Accounts for young workers

29 January 2008

Australia’s customer-owned banking sector is urging the Government to ensure its promised First Home Saver Accounts are attractive for young people and lower income earners.

Credit unions and mutual building societies are proposing that the superannuation co-contribution scheme be extended to First Home Saver Accounts.

The proposal is in a Budget submission to Commonwealth Treasury commissioned by Abacus – Australian Mutuals, the industry body for credit unions and mutual building societies. The submission was prepared by the South Australian Centre for Economic Studies and is available at www.abacus.org.au.

Credit unions and mutual building societies strongly support Prime Minister Rudd’s commitment to foster a culture of savings. As Mr Rudd said last week, “providing attractive incentives to save can help take the pressure off inflation, help people save for their future, and help lift national savings.”

Credit unions and mutual building societies have a long tradition of encouraging Australians to save.

“Collectively our sector holds more Australian household deposits than any institution other than the Commonwealth Bank,” said Abacus acting chief executive Louise Petschler.

“The Government’s First Home Saver Accounts will have a concessional tax rate of 15% and this represents a policy approach that is warmly welcomed by credit unions and mutual building societies,” Ms Petschler said.

“However, a ‘concessional’ tax rate of 15% is not very attractive if your marginal tax rate is 15% as is the case for many young people and other low income workers.

“From 1 July 2008, the 15% rate will apply to incomes up to $34,000 and from 1 July 2010 it will apply to incomes up to $37,000.

“Extending the super co-contribution scheme to First Home Saver Accounts is a well targeted and anti-inflationary measure to foster a culture of savings.

“Under the super co-contribution scheme, low-income earners are eligible for Government payments of up to $1500 annually.

“We put forward options in our submission to link the super co-contributions scheme to the First Home Saver Account program.

“Our submission also makes suggestions about the design of the First Home Saver Account program to maximise choice and competition to benefit savers and to provide safeguards to protect risk-averse savers.

“Authorised Deposit taking Institutions (ADIs) - banks, building societies and credit unions - are the main home lenders so borrowers will benefit if ADIs can compete with superannuation funds in providing First Home Saver Accounts,” Ms Petschler said.

For more information:

Louise Petschler 0408 239 226 or 02 8299 9046 This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Mark Degotardi 0419 998 201 or 02 8299 9053 This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 download pdf version here 34.35 Kb

 download submission here 205.68 Kb