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FIRST HOME SAVER ACCOUNTS AMENDMENT (NOTICE OF CHANGES) REGULATION 2014 (SLI NO 53 OF 2014)

EXPLANATORY STATEMENT

Select Legislative Instrument No. 53, 2014

Issued by authority of the Treasurer

First Home Saver Accounts Act 2008

First Home Saver Accounts Amendment (Notice of Changes) Regulation 2014

Section 131 of the First Home Saver Accounts Act 2008 (the Act) provides the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the First Home Saver Accounts Amendment (Notice of Changes) Regulation 2014 (the Regulation) is to amend the First Home Saver Accounts Regulations 2008 to require First Home Saver Account (FHSA) providers to inform individuals applying for FHSAs of any announcements by the Government proposing legislative changes that would affect the regulation or tax treatment of FHSAs.

FHSAs are a special form of savings account established under the Act to assist individuals in saving for the purchase of their first home. 

A number of restrictions apply to the creation and use of FHSAs.  FHSA may only be opened by individuals between 18 and 65 who have not previously owned a home in Australia.  No more than $90,000 can be held in a FHSA, and amounts can generally only be withdrawn from a FHSA in limited circumstances, such as to assist in the purchase of a first home after contributions have been made over four financial years. 

However, amounts held in FHSAs receive significant tax concessions and the Commonwealth pays an annual contribution of 17 per cent of the contributions made to a FHSA in an income year, up to a cap of $1,020.

On 13 May 2014, as part of the 2014-15 Budget, the Government announced its intention to abolish FHSAs.  As part of this abolition, the Government indicated it would introduce retrospective legislation to prevent the creation of any new FHSAs after the time of the announcement.

In the period between this announcement and the passage of legislation to give effect to the Government's proposed changes, individuals may still open new FHSAs.  However, amounts contributed to these accounts will not benefit from the tax concessions or Government contributions that are provided to other FHSAs following the passage of legislation to implement the changes announced by the Government. 

Given these significant consequences, the Regulation amends the First Home Saver Accounts Regulations 2008 to require entities providing FHSAs to inform individuals applying to open or create a FHSA of any proposed changes to the Act detailed in announced by a responsible Minister in Parliament before accepting the application.

A transitional rule applies in respect of applications to open a new FHSA made and accepted between Budget night and the time the Regulation would commence.  During this period the Regulation will not be in place and so applications may be accepted by FHSA providers without notice of the proposed changes having been provided.

To address this situation, the Regulation provides that the FHSA provider is not required to advise the individual of any announced amendments before accepting the application to open or create a FHSA, but must instead provide written notice to the individual within seven days of the FHSA being opened or issued.  This will ensure individuals are made aware of the Government's proposed changes before the end of the 14 day cooling-off period in which they can withdraw from a FHSA without penalty.

The Act does not specify any conditions that must be satisfied before the power to make the proposed Regulation may be exercised.

No consultation was undertaken on this measure as it forms part of a Budget initiative.  Releasing any information on the measure prior to announcement could have been exploited to obtain windfall gains by establishing FHSAs in the knowledge the restrictions on the use of the funds contributed would be restricted.  Subsequent to the announcement, this measure needed to be legislated as soon as possible in order to ensure all new applicants are provided with information about the proposed changes affecting FHSAs.

The Regulation commenced on the day it was registered.

ATTACHMENT

Details of the First Home Saver Accounts Amendment (Notice of Changes) Regulation 2014

Section 1 - Name of Regulation

This section provides that the title of the Regulation is the First Home Saver Accounts Amendment (Notice of Changes) Regulation 2014 (the Regulation).

Section 2 - Commencement

This section provides for the Regulation to commence on the day of registration.

Section 3 - Authority

This section specifies that the Regulation is made under the First Home Saver Accounts Act 2008 (the Act).

Section 4 - Amendment of First Home Saver Accounts Regulations 2008

This section provides that the First Home Saver Accounts Regulations 2008 (the Principal Regulations) are amended as set out in the Schedule.

Schedule - Amendments

Item 1 - Regulation 13AA

Regulation 13AA of the Principal Regulations requires that entities providing first home saver accounts (FHSAs) must, before opening or issuing a FHSA after the commencement of the Regulation, provide written notice the applicant of the effect of any proposed changes to the Act outlined in Parliament by the responsible Minister (the Treasurer or a Minister acting on his behalf - see sections 19 and 19A of the Acts Interpretation Act 1901) on or after 13 May 2014.

This requirement ensures that individuals are advised of the Government's proposed abolition of the Act, including its intention to introduce retrospective amendments to prevent the creation of new FHSAs after Budget night, prior to applying to open a FHSA to which the changes will apply.

The written notice required does not need to be detailed or specific to the individual.  In broad terms, all it needs to do is identify that the Government has detailed in Parliament an intention to change the law, the nature of that change and the broad implications of that change for individuals. 

For example, in the context of the Government's announced changes in the 2014-15 Budget, the notice would need only:

•                 detail that an announcement had been made in the budget that the FHSA Act would be repealed from 1 July 2015, and retrospective amendments are to be introduced to Parliament that would prevent any FHSA created or opened after Budget night from being treated as a FHSA (with more details available in the budget papers at budget.gov.au);

•                 explain that the effect of the proposed changes would be to remove all concessions and restrictions on amounts held in FHSAs from 1 July 2015, but also mean that accounts created after budget night would obtain none of the benefits of being a FHSA, including the tax concessions and Government contributions, while still being subject to the restrictions on accessing the amounts until 1 July 2015

Item 1 - Regulation 13AB

Individuals who apply for a FHSA after Budget night and have their application accepted before the commencement of the Regulation fall outside the scope of Regulation 13AA.  However, Regulation 13AB of the Principal Regulations establishes a transitional rule for this situation.

Under Regulation 13AB, where a FHSA has been opened or created in these circumstances, within seven days of the account being opened or created the FHSA provider must notify the FHSA holder in writing of the effect of any proposed changes to the Act that have detailed in Parliament by the responsible Minister on or after 13 May 2014. 

This notice needs to provide same information as is required for the notices under Regulation 13AA.  However, the notice must also outline the operation of the cooling-off period for FHSAs under section 1019B of the Corporations Act 2001 and the day on which the cooling-off period for the applicant ends.

This transitional rule ensures that individuals who open or create FHSAs to which the Government's announced retrospective changes prior to the commencement of the Regulation are nonetheless advised of the proposed amendments and of their entitlement to close the FHSA and withdraw any contributions without penalty.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

First Home Saver Accounts Amendment (Notice of Changes) Regulation 2014

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The First Home Saver Accounts Amendment (Notice of Change) Regulation 2014 (the Regulation) requires entities providing first home saver accounts (FHSAs) to provide written notice to individuals applying for FHSAs after Budget night of the effect of any proposed changes to the First Home Saver Account Act 2008 detailed in Parliament by the Treasurer or a Minister acting on behalf of the Treasurer.

If the application has not been accepted prior to the commencement of this Regulation, the FHSA provider must provide the written notice to the individual before accepting the application.

If the application has been accepted prior to the commencement of this Regulation, the FHSA provider must inform the individual of the changes within seven days of the FHSA being opened or created.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

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