First-home deposit savings fast-tracked under Budget proposal

EXCLUSIVE: First-home buyers would be offered generous tax breaks worth thousands of dollars under a last-minute plan to help a generation of young Australians get into the property market.

Tom Pope and partner Eloise Fallon carry on in their search for a break into Sydney’s property market.

FIRST-HOME buyers would be offered generous tax breaks worth thousands of dollars under a last-minute plan to help a generation of young Australians get into the property market.

Nine days out from the federal Budget the Turnbull Government is preparing to tick off on the plan, which will allow buyers to direct some of their pre-tax income into a savings account.

The plan, similar to salary sacrificing, would slash the time it takes to save a deposit and dramatically cut buyers’ overall income tax bills.

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 due to a lack of take-up.

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 against reintroducing a Rudd-era savings scheme.

“The fundamental problem is that the scheme would either be small and have an irrelevant impact or be too large and counter-productive,” he said.

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, has campaigned for the federal government to reintroduce a scheme to allow aspiring home owners to salary-sacrifice income for a deposit. The group said creating an enhanced version of the Rudd government’s proposal with greater flexible features would make it more attractive to first home buyers.

Treasurer Scott Morrison has previously said the “real pinch point” for first home buyers was being able to save a big enough deposit to get into the housing market.

‘WE MISSED THE BOAT; WE WERE A COUPLE OF GRAND OFF’

TOM Pope and Eloise Fallon have only recently tried to make a break into the bullish Sydney property market.

And like most first-home buyers, the couple, aged 31 and 28, have had to adjust their expectations.

“We’ve missed the boat,” said Mr Pope, who was hoping to buy a property in Sydney’s inner west.

But with the prices there far exceeding their price range, the couple have begun looking further out from the city.

Yesterday they attempted to bid on a three-bedroom home at Station St, Arncliffe, only to see it sold just above their maximum price.

“We were a couple of grand off,” Mr Pope said.

“We’ll have to look at what we can afford. Rockdale feels out of reach of us still, only by a small amount, but we’ll give it a couple of weeks... [to] try and get in the market.”

Mr Pope said it was the auction process in a tight market that seemed to push up prices so dramatically.

“At an auction it only takes a couple of people to really want the place and then what you think is market value just goes out the window” he said.

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