Budget 2017: A Win for First Home Buyers and Housing Affordability?
On Tuesday 9 May, the federal government released the 2017 budget to the public. Among numerous measures, the limelight was cast upon making housing more affordable for first home buyers.
Treasurer Scott Morrison stated: “there are no silver bullets to make housing more affordable. But by adopting a comprehensive approach, by working together, by understanding the spectrum of housing needs, we can make a difference.”
A serious attempt at tackling Australia’s mounting affordability issue came with the critical First Home Super Savers Scheme, which targets super contributions and withdrawals.
So how does it work?
The Scheme allows people to make contributions into their super fund for the purpose of saving for a deposit on a first home. You’ll be able to deposit $15,000 per year and up to $30,000 in total, with contributions being taxed at a low rate of 15%.
On making a withdrawal, you’ll be taxed at marginal tax rates, minus a 30% offset. You will only be able to withdraw contributions identified under the Scheme, but overall looks to be more effective than putting money into a traditional bank account.
How will first home buyers’ benefit?
The Government estimates the Scheme will accelerate first home buyers’ savings by 30%, with the official announcement stating: “this is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation.”
However, the benefits will be felt by first home buyers only.
It must be noted that the Scheme itself will not necessarily cover the deposit entirely; $30,000 may not cover a 20% deposit expected in some capital cities. There will be a need to save outside the Scheme. However, it does offer an advantage for people struggling to gather funds, as it provides a small tax break to increase the deposit for a home.
If passed, first home buyers can start making contributions from 1 July 2017, and withdrawals from 1 July 2018.
Other measures to boost housing affordability?
Housing stock is estimated to free up for young families as older Australians are encouraged to downsize. The housing pool is expected to widen as people aged 65 years or older can now make an after-tax contribution up to $300,000 from the sale of their home into their super fund.
If the property is held for at least ten years and is the principal place of residence, both partners can contribute, meaning a combined amount of up to $600,000 can be deposited.
The government has also proposed to create agreements with states and territories to deliver more housing supply, and as Scott Morrison continues: “get more homes built”.
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