BIG TAX BREAK FOR FIRST HOMEBUYERS

Fed­eral Gov­ern­ment launches af­ford­abil­ity plan

Sunday Territorian - - FRONT PAGE - ANNIKA SMETHURST

FIRST-HOME buy­ers will be able to use some of their pre­tax in­come to save for a house de­posit un­der a last-minute plan to help young Aussies break into the prop­erty mar­ket.

Nine days out from the Fed­eral Budget the Turn­bull Gov­ern­ment is fi­nal­is­ing a pro­posal which would al­low aspir­ing home­own­ers to salary sac­ri­fice a capped amount of their pre-tax in­come each year.

The plan would boost the sav­ings po­ten­tial of first home buy­ers and of­fer a gen­er­ous tax break to younger Aus­tralians by re­duc­ing their in­come tax.

Hous­ing af­ford­abil­ity is ex­pected to be a key part of next week’s budget but the Turn­bull Gov­ern­ment has ruled out abol­ish­ing gen­er­ous tax breaks for in­vestors such as neg­a­tive gear­ing and cap­i­tal gains tax con­ces­sions. Se­nior Gov­ern­ment MPs now be­lieve the salary sac­ri­fic­ing plan would be a way of of­fer­ing tax breaks to first home buy­ers af­ter an ear­lier pro­posal to al­low em­ploy­ees to re­di­rect their su­per con­tri­bu­tions to a sav­ings ac­count was re­jected.

A sim­i­lar sav­ings sys­tem in­tro­duced by for­mer prime min­is­ter Kevin Rudd was abol­ished by the Coali­tion in 2015.

Un­der that scheme, prospec­tive home buy­ers could con­trib­ute just $5000 of their pre-tax earn­ings to a sav­ings ac­count, ef­fec­tively re­duc­ing their tax­able in­come by $5000 in that year. An ad­di­tional $5000 a year post-tax in­come could be added to the ac­count taxed at a con­ces­sional rate.

The Grat­tan In­sti­tute’s John Da­ley warned the Gov­ern­ment against rein­tro­duc­ing a Rudd-era sav­ings scheme for first home buy­ers.

“The fun­da­men­tal prob­lem is that the scheme would ei­ther be small and have an ir­rel­e­vant im­pact or be too large and counter-pro­duc­tive.” But a se­nior Gov­ern­ment source said the lat­est pro­posal would be “more gen­er­ous and less com­pli­cated” than the axed scheme and would in­clude an­nual and over­all caps to avoid flood­ing the mar­ket with new buy­ers.

First Home Buy­ers Aus­tralia, an ad­vo­cacy group for young Aus­tralians try­ing to break into the mar­ket, has cam­paigned for the Fed­eral Gov­ern­ment to rein­tro­duce a scheme to al­low aspir­ing home­own­ers to salary sac­ri­fice in­come for a de­posit.

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