Savings Plan to Save the Australian Dream
Later this year, the government’s first home savings account scheme could see the great Australian dream reinvigorated. While many young Australians have now given up hope of owning their own turf, saving for that home deposit will be significantly easier once the new plan gets underway. But is this really the salvation of would-be home owners, or will continued inflation push housing beyond the reach of even those who are able to save a deposit under the scheme?
The outcome of the new plan will be similar to that of salary sacrificing. The government will provide a co-contribution towards after-tax deposits made by individuals of up to $5,000 per year. The percentage of the co-contribution will depend on the individual’s tax level. The government will contribute either 15% or your tax rate minus 15%, whichever is the higher amount. For example, if you pay 30% tax, the government will contribute $750 for the first $5,000 you deposit. But if you pay 40% tax, the government will chip in $1,250. Those paying 45% tax will reap $1,500 in contributions, and so on.
First Home Saver Accounts will be offered by banks, building societies and credit unions to name a few. Parents, or anyone else for that matter, will be allowed to contribute. However, contributions will be capped at $10,000 per year. Employers may also contribute, and employees will have the option of requesting automatic contributions to be made each pay day for the amount of their choice, coming out of their after tax pay packet.
If the savings scheme is a success, and housing becomes more affordable, the great Australian dream could live on. But in order for that to happen, two things need to occur. Inflation needs to be reined in, and housing affordability needs to be improved. This could be one of the greatest challenges facing our current generation. How it all plays out will depend on many factors which are hard to predict. Are you along for the ride?
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