The Federal Government has made its centre-piece scheme to tackle housing affordability more equitable.
The initial plans for the Rudd Government’s first-home saver account scheme gave more benefits to higher-income earners than it did those most in need of assistance.
In the 2008 Budget, however, it has outlined a revised scheme that would help all first-home buyers regardless of how much they earn.
Under the scheme, buyers aged between 18 and 65 will enjoy government contributions to special savings accounts.
- The Government will chip in with a 17 per cent contribution on the first $5000 made each year into the account, with a maximum benefit of $850 a year.
- Savers will not pay tax on contributions to their accounts. And when they use the pot of money for a deposit on a home, the withdrawal will be tax free.
Such accounts have been criticised as doing nothing to improve the supply of new housing, which could mean they just lead to even higher house prices.
The scheme announced in the budget sets a common contribution across all pay scales. Interest received on money in the savings account will be taxed at 15 per cent.
The cost of the scheme is put at $1.2 billion over four years.
People wanting to set up a savings account would not need a minimum deposit.
However, to withdraw funds minimum contributions of $1000 need to be made in at least four separate financial years.
The home-buyer will have to live in the house for at least six months during the first year of ownership or face penalties.
Savers can also close their accounts at any time and tip the balance into superannuation.
A couple on salaries of $61,000 who save 10 per cent of their income would benefit from using the accounts by about $12,600 after five years.