Treasurer Joe Hockey said they are dropping the previous government’s incentive as it has done little to improve housing affordability.
In 2008 the Rudd Government introduced the first home savers account scheme to help Australians save towards a home loan deposit.
The government-implemented savings account encouraged Australians to save for home loan deposits by co-contributing 17 percent for the first $6000 savings contributed each year and offering a lower tax rate of 15 percent on interest earned on the account.
But despite the savings and tax benefits, the incentive barely caught wind, with the Labour Government’s prediction of helping hundreds of thousands of first home buyers falling far short.
The abolishment of the home savers’ scheme is set to save the current government $143 million over the next five years but does little to assist first home buyers looking to get into the market.
First home buyers who open up an account after yesterday’s budget announcement will no longer receive any special government contributions or tax breaks.
With these latest Budget cuts set to further affect a dwindling first home buyer’s market, will many be looking to the government to increase, or revive, popular home buyer’s grants?
“Unfortunately, the ‘bring back the grant’ argument is the easiest, quickest and most familiar reaction first home buyers have to help them get a home. What most people don’t understand is that it just fuels higher house prices and doesn’t fix the underlying problem,” Alex Parsons, CEO of RateCity.com.au, said.
“Rather than kicking the can along the road with more grants, we should instead be focusing on schemes that encourage and support real savings by first home buyers in Australia. This needs to be combined with a thorough review of some of the key drivers of affordability issues such as negative gearing, stamp duty and land supply constraints.”
The government’s co-contributions to the current First Home Saver Accounts will end on July 1, followed by the withdrawal of the tax breaks in July 2015.