House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan Mp

General outline and financial impact

First Home Saver Accounts

The First Home Saver Accounts Act 2008 , the First Home Saver Accounts (Consequential Amendments) Act 2008 and the Income Tax (First Home Saver Accounts Misuse Tax) Act 2008 implemented the Government's election commitment to introduce First Home Saver Accounts (FHSAs).

Context

The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 (FHSA (Further Provisions) Bill) implements further aspects of the Government's FHSA policy.

The First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 (FHSA Supervisory Levy Bill) introduces a framework for imposing a levy on FHSA providers to provide funding for the Australian Prudential Regulation Authority (APRA) to carry out its supervision of financial institutions which offer FHSAs.

Overview of arrangements

The FHSA (Further Provisions) Bill deals with a number of areas, including the following.

Secrecy and the exchange of information

Amendments are being made to ensure the secrecy provisions enable Commonwealth agencies to share information they require in order to fulfil their statutory obligations, while also ensuring the privacy of account holders is protected.

Unclaimed money

A scheme for dealing with unclaimed money in FHSAs will be established. This will be similar to the way other non-superannuation investments are currently administered. FHSAs which have been inactive for seven years, and where the provider has been unable to contact the account holder, will be paid to the Commonwealth. Individuals who later identify themselves to the FHSA provider will be able to reclaim their money.

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The unclaimed money provisions will ensure that FHSA providers are not required to service small, inactive accounts. This is expected to ease the compliance burden for providers.

Supervisory levy

The FHSA Supervisory Levy Bill introduces a framework for imposing a levy on FHSA providers to provide funding for APRA to carry out its supervision of financial institutions which offer FHSAs. This is consistent with the existing financial sector levy framework that funds APRA's supervisory activities on a user-pays basis.

Outline

Chapter 1 describes the operation of the unclaimed money scheme.

Chapter 2 describes the secrecy and exchange of information provisions.

Chapter 3 describes the operation of the FHSA providers supervisory levy.

Chapter 4 describes the various other amendments made by the FHSA (Further Provisions) Bill.

Date of effect : The amendments in Schedule 1 to the FHSA (Further Provisions) Bill apply from 1 October 2008. These provisions deal primarily with taxation issues and ensure FHSAs operate as intended.

The amendments in Schedule 2 to the FHSA (Further Provisions) Bill commence and apply from the day after Royal Assent.

The amendments in Schedule 3 to the FHSA (Further Provisions) Bill and the FHSA Supervisory Levy Bill commence and apply from 1 July 2009.

The commencement of the amendments in Schedule 4 to the FHSA (Further Provisions) Bill is contingent on the commencement of Schedule 1 to the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 .

Proposal announced : FHSAs were announced in the 2007 Federal election campaign. On 4 February 2008, the Treasurer and the Minister for Housing announced that the Government had formally approved the establishment of FHSAs. A detailed proposal for public consultation was released on 8 February 2008 in First Home Saver Accounts - Outline of proposed arrangements . The Government's final decisions were announced as part of the 2008-09 Budget in the Treasurer's Media Release No. 040 of 13 May 2008.

Financial impact : The amendments in the FHSA (Further Provisions) Bill will not have a financial impact. The FHSA Providers Supervisory Levy Bill is designed to recover the cost of APRA's supervision of FHSA providers and therefore has no net financial impact.

Compliance cost impact : There are likely to be medium implementation costs for providers who choose to offer FHSAs. However, the design of the initiative as reflected in the law has sought to minimise compliance costs for account providers.