Federal Budget 2017: First home buyers to get preferential tax treatment

Federal Budget 2017: First home buyers to get preferential tax treatment
Federal Budget 2017: First home buyers to get preferential tax treatment

First home buyers will receive preferential tax treatment in the budget tomorrow night to enable them to save for a deposit.

Sources have confirmed the budget will introduce its own version of first home saver accounts which will resemble a superannuation account.

First home buyers will receive concessional tax treatment on contributions by being able to salary sacrifice, The Australian Financial Review advised.

The earnings will be taxed at a concessional rate. 

There will no contributions from the government.

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.

Couples with individual accounts would be able to pool their accounts.

Despite the government's policy having both annual and global caps, the Australian Financial Reviews suggested its still risks being criticised as fuelling demand, a key reason why there was widespread opposition to enabling people to use their superannuation to buy houses.

"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," Assistant Treasurer Michael Sukkar told Sky News.

"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 won't be 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.

The government will also encourage a national scheme in which investors will be taxed for leaving properties vacant.

Tags: 
First Home Buyers Federal Budget

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