Government encourages deposits

In its 2010-2011 Budget, the Federal Government has acknowledged flaws in the First Home Saver Accounts scheme and announced a tax concession for interest on deposits.

First Home Saver Accounts
The Government has announced it will allow savings in an FSA Account to be paid into an approved mortgage after the end of a minimum qualifying period, rather than requiring it to be paid to a superannuation account.

The Government will release draft amendments for consultation over the coming months.

The changes will apply for houses purchased after Royal Assent of the legislation giving effect to this change.

Tax discount on deposit interest
The Government has announced that from 1 July 2011, individuals will be eligible for a tax discount equal to 50 per cent on up to $1,000 of interest earned, including on deposits held with any bank, building society or credit union, as well as bonds, debentures or annuity products.

The Government will consult on details concerning the operation of the discount, including on the final scope of eligible savings products and the mechanism for applying the discount to interest earned indirectly by individuals.

The most likely starting point will be the Chapter 4 of the Henry Tax Review Final Report.

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