Federal election: Coalition pledges mortgage tax deduction for first-home buyers on new builds 

If elected in this year’s federal election, the Coalition plans to allow first-home buyers of newly built homes to claim a tax deduction on mortgage interest payments. 

Dubbed as the “First Home Buyer Mortgage Deductibility Scheme”, the plan will allow first-home buyers to deduct the interest paid on up to $650,000 of their mortgage from their income – as long as their home is brand new. 

While there is no cap on the overall mortgage size or home price, only the interest on the first $650,000 of the loan will qualify for deductions.  

Under the plan, the measure would be available to individuals earning an annual income of up to $175,000 and joint applicants earning up to $250,000. 

The measure would only be applied to new builds, which could boost construction and increase housing supply. 

For example, a first home buyer with a taxable income of $120,000 with a $650,000 mortgage at 6.1% will receive a benefit of around $12,000 a year. 

The Coalition also announced boosts to the Home Guarantee Scheme, which includes the First Home Guarantee, Family Home Guarantee and Regional First Home Buyer Guarantee.  

Under the proposed plan, the income cap in these programs for individuals will increase from $125,000 to $175,000, the income cap for joint applicants will increase from $200,000 to $250,000, the property price caps will increase and the number of places under the First Home Buyer Guarantee and Regional First Home Buyer Guarantee will be uncapped.  

The announcement comes after shadow federal housing minister Michael Sukkar announced the Coalition would ease property lending rules for first-time borrowers.  

How it impacts the industry

Building and construction body Master Builders Australia applauded the announcement, noting it as a “positive and practical long-term incentive”.  

“Helping first home buyers enter the market by supporting new builds and increasing housing supply is exactly the kind of stimulus we need to keep the pipeline of new housing strong,” Master Builders Australia CEO Denita Wawn said. 

According to Ms Wawn, the policy supports first-home buyers but must be matched with reforms to address the constraints driving construction costs.  

“Construction costs have increased by more than 40% over the past five years, and much of that pressure comes from lack of productivity and planning bottlenecks,” she said. 

“If we’re going to make housing more affordable and accessible, we need serious action to improve planning systems, streamline approvals, and lift productivity in the construction sector.”  

The plan would allow first-home buyers to deduct the interest paid on up to $650,000 of their mortgage from their income on newly built homes. Picture: Getty

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The Urban Development Institute of Australia also welcomed the announcement and emphasised how it, along with the Coalition’s $5 billion Housing Infrastructure Programme, would open up new housing.   

“This is a decisive measure that UDIA supports, to back new homes while making it easier for Australians to service a bank loan,” UDIA president Col Dutton said.  

“This creates real outcomes that will alleviate ques for rental properties and competition for existing housing.”  

The Property Council of Australia called the plans a “shot in the arm” for national housing supply.  

“Many tens of thousands of new homes over five years alongside last mile infrastructure improvements are a shot in the arm for our national supply numbers,” Property Council chief executive Mike Zorbas said.  

“Coupled with supply improvement policies, deductibility of mortgage repayments on new builds will help first home buyers who are watching their dream of home ownership slip away.”

Who will be eligible for the deduction?  

First-home buyers who buy newly built homes as their principal place of residence will be eligible. 

How much can buyers deduct?  

The Coalition said first-home buyers can deduct the interest paid on up to $650,000 of their mortgage from their assessable income. 

Is there a cap on mortgage size or home price?  

There is no cap on mortgage size or home price, but only the interest on the first $650,000 of the loan will qualify for deductions. 

Is there an income limit?  

The measure will only apply to individuals earning up to $175,000 and joint applicants earning up to $250,000. Once eligible, applicants will retain access to the deduction even if their income rises. 

Are you interested in buying or building new? Check out our New Homes section.