In a new savings plan from the Labor Party, families would be able to divert some of their pre-tax earnings into special accounts to save for a home deposit in a similar fashion to top-up superannuation, under a plan being considered by Kevin Rudd.
Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.
John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.
The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.
"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.
The accounts are intended to have a concessional rate of tax like super accounts.
But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.
Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.
"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.
"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."
Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".
"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.
"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."
Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian
