A Government proposal aimed at increasing home ownership among low-income earners, known as the “Help to Buy” scheme, has divided Senators.
The program would see the government contribute to the purchase of a home, in exchange for split ownership of the property.
The Coalition has opposed the proposal. That means Labor needs the support of the Greens and independents to get its reforms through the Senate (upper house).
However, the Greens said they won’t support the measures unless the government scraps tax discounts for people who own multiple properties.
Buying a home
To buy a home in Australia, a purchaser is required to pay an upfront deposit worth about 20% of the sale price. The rest of the purchase can be made with a mortgage — a bank loan that you pay off over time with interest.
According to property data analyst CoreLogic, property values have soared from a national average house price of $552,200 in 2019 to $759,400 in 2024.
That’s an increase of nearly 38% in five years.
Help to Buy
Under the proposal, a person could pay a minimum 2% deposit to purchase a home. The government would provide ‘equity’ worth up to 30% of the property’s value, or 40% for new builds.
Equity means the government would be a part-owner of properties under the scheme. It would also be entitled to up to 40% of a property’s value when it’s sold.
The government argues the 2% deposit is a more realistic target for many Australians. It added the government’s equity would allow owners to apply for smaller mortgages.
The government introduced its Help to Buy Scheme to Parliament in November.
Under the proposal, 40,000 people could access the scheme over four years.
To be eligible, a person must be a first-home buyer. A single person must not earn more than $90,000 per year, or $120,000 for couples. If a homeowner’s income increases above these caps, they could be made to repay the government’s equity.
Property price caps will limit which homes can be purchased under the scheme. The caps are based on areas, for example: $950k in Sydney, $400k in regional South Australia.
Example
Prospective first-time home buyer Alex earns $75,000 and wants to buy a new home worth $750,000 (about the national average) in Melbourne.
A 2% deposit means Alex needs to save $15,000.
The government will pitch in 40% of the home value, which is $300,000. That leaves Alex with a $435,000 mortgage.
A few years later, Alex decides to sell the house. Regardless of how much it goes for, (either above or below the $750k), the government will get 40% of the sale price.
Greens debate
The government will need support from the Greens and a handful of independents to pass its housing reforms.
However, the Greens are concerned the 40,000-buyer cap will create a “housing lottery” and pit hopeful home owners against each other.
The party has also called for rent freezes, which most states and territories have ruled out.
Greens leader Adam Bandt said his party will negotiate with the government on its proposal. He stated he wants action on negative gearing and capital gains tax concessions.
Negative gearing
Australians who own multiple properties may lease them out to renters.
If a property’s mortgage repayments are higher than the rental income it makes, an owner may be eligible for tax relief called ‘negative gearing’.
For example: If a landlord receives $20,000 in rental income per year for a property with a mortgage that costs $25,000 per year, they will record a loss of $5,000.
That loss can be taken off the property owner’s taxable income — meaning they can end up paying less tax.
Capital Gains Tax
When you own something (an asset e.g. a house) and then sell it, you might sell the asset for more than what you bought it for. That’s called making a capital gain, which is just another term for “personal profit”.
For instance, if you sell some shares in a company for $500 more than what you bought them for, then you are required to include that profit in your income tax for the year (e.g. your salary + $500).
If you’ve owned the asset for more than a year and live in Australia, then you can get a tax discount for the “capital gain”.
Greens v. Labor
The government is not expected to negotiate on the Greens’ proposal. It will try to pass the Help to Buy scheme in its current form.
Greens spokesperson Max Chandler-Mather called the scheme “hard-to-get” and said it risked driving up house prices.
Housing Minister Julie Collins urged the Greens to support the scheme. She said they’re “standing in the way of vital new assistance to help renters into the security of home ownership”.
