First Home Savers Better Off Under Federal Labor
Media Statement - 23rd November 2007
Federal Labor’s superannuation style First Home Saver Account provides a bigger boost than the Coalition’s scheme – with a young working couple saving $7,300 more over five years.
A couple – both earning $50,000 and each saving the equivalent of 10 per cent of their post-tax income – will be able to accumulate a healthy deposit of $60,000 over five years. That is $7,359 more than under the Coalition’s scheme.
This is because Federal Labor’s plan allows individuals to make tax deductible contributions of up to $5,000 compared to the Coalition’s maximum deductible contributions of $1,000.
Even after low 15 percent contributions tax that is applied to the pre-tax contribution the total tax benefit under Labor is greater.
Individuals can accumulate a much larger home deposit because they receive a larger tax benefit on their contributions. That is $1,025 under Federal Labor compared to $355 under the Coalition for a person on $50,000.
Beyond this, Federal Labor also provides for a minimum four-year saving period allowing individuals to access potentially higher returns in superannuation-style accounts compared to the Coalition’s ordinary accounts.
Federal Labor’s First Home Saver Account is more responsible and is better targeted.
By helping first home buyers accumulate a bigger deposit for their home, Federal Labor’s scheme will help reduce the mortgage burden on families.
A chart is available as a PDF under 'downloads' on this page.
Notes:
- Individuals saving an equivalent of 10 per cent of their disposable income.
- Income and cap on pre-tax contributions indexed to wage growth of 4.3 per cent
- For First Home Saver Account, assumes ten year average annual rate of return for ‘Balanced’ superannuation account option, as at June 2007, of 7.5 per cent per annum.
- For Coalition Deposit Account, assumes average interest rate of 6 per cent per annum.
- Based on 2008-09 tax parameters.