First home buyers will receive preferential tax treatment in the budget to enable them to save for a deposit, but caps will be imposed to limit the pressure on house prices and to avoid costing the government too much revenue.
After days of speculation, sources have confirmed the Coalition will introduce its own version of first home saver accounts which will essentially resemble a superannuation account.
First home buyers will receive concessional tax treatment on contributions by being able to salary sacrifice, and the earnings will also be taxed at a concessional rate.
There will be caps on the amount that can be contributed annually and an overall cap on the size of the fund. There will be no age limit on who can set up such a fund but it can only be used for the purchase of a first home.
The new accounts will be a different version to the first home saver accounts Labor introduced and which the Abbott government abolished at the 2014 budget.
Despite the government’s policy having both annual and global caps, it still risks being criticised as fuelling demand (which is baloney), a key reason why there was widespread opposition to enabling people to use their superannuation to buy houses.
On Thursday Reserve Bank of Australia Governor Philip Lowe joined in, saying boosting supply was more important than driving demand.
“You don’t address housing affordability by adding to demand,” Dr Lowe said.
On Thursday, Assistant Treasurer Michael Sukkar told Sky News: “I think on budget night, I don’t want to raise expectations too much, but anyone who is saving for a deposit for their first home will be pleased with the steps by the government.
“By the time you save the money for a deposit the market has moved on and now you need 60 or 70 thousand.”
The policy will be one of a handful on budget night aimed at improving housing affordability but the government has baulked at tackling demand-side factors such as negative gearing and capital gains tax concessions.
On the supply side, it will encourage retired couples to downsize from the family home. People who downsize will be able to use the proceeds to bolster their retirement by being offered exemptions from the annual $100,000 cap on on on-concessional superannuation contributions and the $1.6 million cap on retirement accounts. However, the proceeds from downsizing are not expected to be exempt from the pension assets test. (which means that few will do this – this new arrangement will only work if it is asset test exempt. like in New Zealand)
The government will also encourage a national scheme in which investors pay a tax for leaving properties vacant, a process known as land banking.
The government has played down in recent weeks its ability to improve housing affordability, especially after it baulked at doing much to temper demand.
Labor’s proposal goes a lot further and includes restricting new negative gearing to new homes only and halving the capital gains tax exemption for investors from 50 per cent to 25 per cent.
Original article here