Peter Dutton has super-charged his fight against Labor over housing policy with a promise that first time buyers of newly built homes would be able to deduct the interest paid on their mortgage from income taxes under a Coalition government.
In what would be a controversial but historic structural change to the nation's tax system, the policy would mean a family on average incomes would be about $11,000 a year better off — or $55,000 over five years.
The "first home buyers mortgage deduction scheme" would be limited to five years and the interest on paid on the first $650,000 of a mortgage, as first revealed by the ABC, and is expected to cost the federal budget $1.25 billion over the forward estimates.
It would also be means-tested at $175,000 for singles and $250,000 for couples and recipients must live in the property. Once eligible, participants will be able to retain access to the scheme even if their income goes up.
Because access to the scheme is dependent on the property being a new build, the Coalition argues it will boost construction activity and housing supply.
Mr Dutton unveiled the policy at the Liberal campaign launch in western Sydney on Sunday, hours before Prime Minister Anthony Albanese in Perth will showcase Labor's plans to enable first home buyers to enter the market with a 5 per cent deposit, avoiding lenders mortgage insurance.
"Today I bring a message of hope to all Australians seeking to own a home of their own," Mr Dutton told the audience of party faithful.
"I will be a prime minister who restores the dream of home ownership."
Coalition housing spokesperson Michael Sukkar told the ABC that the Coalition's housing policy would demonstrate that Labor's offering on housing is a "lazy Clayton's policy".
He said the Coalition, by contrast, would offer "a massive structural change to our tax system to provide a huge tax concession to encourage first home buyers, to give them the firepower in the first place".
The Coalition is expected to insist that its policy would help boost supply of housing by being linked to new construction.
"In Australia you only get a new house built if someone is prepared to commit," he said.
"The way you unlock supply is encourage someone to pre-commit to a new dwelling."
While of huge up-front benefit to first home buyers, the Coalition's scheme is likely to receive heavy scrutiny from economists and tax experts.
In most countries where mortgage interest payments are tax deductible, governments tend to claim a substantial portion of the capital gain of people's homes when they sell.
Announcement to set up battle over housing
The Coalition's plan sets up a direct contest with Labor, which will also spruik its first home buyer centric housing policy at the campaign launch in Perth.
Labor has vowed to allow all first home buyers to purchase a property with a 5 per cent deposit, avoiding the need for lenders' mortgage insurance.
Some 50,000 Australians a year already access the income-capped version of the scheme, but the government expects that number will grow to nearly 80,000 after the expansion.
The scheme will not have income caps or a limit on the number of places available.
The government will also pledge $10 billion to go towards building 100,000 properties over eight years exclusively for first home buyers.
"The housing that is being built today is not affordable for most young people who are entering the market and that's the real problem," Housing Minister Clare O'Neil told Insiders.
"What we are doing is supplementing supply at the affordable end of the market and that's where it is really needed.
"Our government will roll up its sleeves and get involved, that is the only answer for the housing crisis confronting our country."
Ms O'Neil said it was too early for her to comment on the Coalition's policy in detail, labelling it "public policy on the run for a campaign on the slide".
"One thing I will say is we have to help young people into home ownership and I'm not sure how this policy is going to assist us to do that," she said.
"The difficulty they are facing is saving a deposit and that is why 5 per cent deposit for first home owners across the country is such a game-changer for young people."
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