BIG TAX BREAK FOR FIRST HOMEBUYERS
Federal Government launches affordability plan
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.