In a report on housing affordability, the Grattan Institute said while the First Home Super Saver Scheme does bring the tax treatment of the savings of potential first home buyers a little closer to the tax treatment of owned homes, it is unlikely to make much difference to affordability.
“First home buyers typically save in bank deposits, and so all interest earned is taxed at full marginal rates of personal income tax. In contrast, owned homes are not taxed on capital gains or imputed rents, and rental property investments are relatively lightly taxed,” the paper explained.
“While there is some fairness in this scheme, it will make little difference to affordability.
The Grattan Institute stated that there is unlikely to be much take-up of the scheme as households will be reluctant to give up access to their savings because if they decide they can’t afford to buy a home, they will be unable to withdraw the money until they turn 60.
“Most studies have found that tax incentives don’t increase the total amount saved much – instead, most of the money that qualifies for the tax incentive is simply transferred from other savings.
Given that the Rudd government’s First Home Saver Accounts had minimal impact, this suggests that the First Home Super Saver Scheme may follow a similar path.
Similar to the new scheme, earnings in the Rudd government’s First Home Saver Accounts were taxed at 15 per cent, rather than marginal rates of tax, but the maximum First Home Saver Account balance was much higher at $75,000, which was later raised to $90,000, the report said.
“The only disadvantage was that savings had to be held in a bank deposit account, likely to have lower returns but less risk, than many superannuation investments,” it said.
“Treasury expected $6.5 billion to be held in First Home Saver Accounts by 2012. Instead, only $500 million had been saved in 46,000 accounts by 2014, when Abbott government treasurer Joe Hockey abolished the scheme, citing a lack of take-up.”
“It is unlikely that overall take-up of the new scheme will be higher, given that it provides similar benefits to the old scheme.”
It could have been done by special purpose vehicles such as a simple RSA, for example. It is too paltry to engineer into a superfund but, it may, for some, be a way they can get around to saving with real purpose rather than a ‘hope over reality’ outcome that happens when there are no restrictions on withdrawal.
Surely Banks would like a captive market of RSA customers looking to purchase their own home?
Political Mastery!! Design a scheme that looks like assistance but remains insufficient or too complex to generate much take up. Then you can spurt rhetoric about what you are doing to help knowing that the impact on the budget will be negligible if anything.