Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

While the government is putting in place a range of policies and measures to help young people achieve the Australian dream of owning a home, those opposite are still trying to get their house in order. It is the never-ending drama of ‘Whose turn is it to be the leader now?’ How much of a turn will the member for Wentworth have on the Liberal Party’s leadership merry-go-round before option B resurfaces, or do they go to D or E? In contrast, and thanks to the strong leadership on this side, the Rudd government is getting on with the job and giving assistance to people to save for a home. Unlike the opposition, which squandered 12 years of opportunity to help struggling families who aspired to own their own homes, we are taking real action.

It is no wonder families are finding it difficult to pay higher interest rates. They had 10 interest rate increases in a row under those opposite. One of the reasons for those interest rate increases is thanks to the last two budgets of the previous Treasurer. As the Financial Review exposed last week, Treasury papers from the International Monetary Fund’s visit to Australia in 2007:

… reveal plainly how Costello’s last two budgets fanned the flames of inflation.

A further quote from the article states:

… the threat of renewed stagflation has come about because Costello practised a dangerous brand of pro-cyclical fiscal policy—increasing government spending while the economy was booming.

A dangerous brand of policy is what the member for Higgins gave us, and that led to 10 interest rate rises in a row for working families across this country. That is about $400 a month that they were slugged with. On this side of the House, we have positive and decent policies that are going to assist people in trying to reach that dream of owning their first home.

The good thing is that the Rudd government is taking action to curb the inflation legacy left to us by the member for Higgins. We are doing that by maintaining surpluses and addressing productivity constraints by investing in education and nation-building infrastructure. We are also helping aspiring first home buyers save a larger deposit by establishing new, low-tax, first home saver accounts. We also have an inquiry going on into bank and non-bank competition to make sure that there are enough players in that competitive market so that downward pressure will be put on interest rates. We are looking at ways in which people with home loans can switch between those home loans so again the competitive pressures of the market will help force down interest rates, making it more affordable for people to own their first home or to own a home.

The electorate of Dobell is blessed with many beautiful features, but one of the things about Dobell is that we also have a large proportion of people who have mortgages. We have a large proportion of young people who moved to the beautiful Central Coast so that they could afford to buy a home. Because of the policies the member for Higgins gave us, I am finding that people in my electorate are struggling to make their mortgage payments and those who are looking to enter the market are struggling to raise a deposit.

Today I am supporting the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 because this bill helps to make it easier for those looking to buy that first home to get that deposit. The first home saver accounts make a number of changes to assist in this way. There is a scheme for dealing with unclaimed money. There are amendments to the secrecy and information shared between the ATO, APRA and ASIC. It deals comprehensively with family law situations. There are various other amendments to ensure that accounts operate as intended.

A scheme for dealing with unclaimed money will be treated similarly to other non-superannuation investments. First home saver accounts which have been inactive for seven years and where the provider has been unable to contact the account holder will be paid to the Commonwealth. Individuals who are later found will be able to make a claim for their money. The unclaimed money provisions will ensure that first home saver account providers are not required to service small, inactive accounts. This is expected to ease the compliance burden for providers.

Amendments are being made to ensure the secrecy provisions enable agencies to access information they require while also ensuring privacy is protected. Provision is also being made for information sharing on first home buyers between the Commonwealth and the states and territories.

In the area of tax, first home saver accounts will not need to be reported in relation to tax file numbers and Australian investment income reports. First home saver account reporting is covered by a separate system.

An amendment to the definition of separate net income has been made to exclude investment returns on first home saver accounts and the government first home saver account contribution from its calculation. Separate net income is used as an income test for a small number of tax offsets, including the dependent spouse tax offset.

Other technical amendments are being made to ensure the taxation of first home saver accounts and first home saver income operates as intended. For family law matters, an amendment is being made to allow individuals to access information about their partner’s first home saver account without the need to formally commence legal proceedings.

Amendments will be made to ensure that payments under a family law obligation—for example, to an account holder spouse—receive the same treatment as if paid to the account holder. Other amendments are being made to provide protection to providers who, in good faith, act in relation to a family law obligation and to ensure contributions made to the first home saver accounts under family law obligations which breach the account balance cap are not paid directly to the account holder.

There are a number of miscellaneous amendments. These include one made to the withdrawal rules to provide better protection to individuals who are unable to meet the occupancy rules due to circumstances beyond their control and to ensure that individuals who misuse their first home saver account money cannot avoid the misuse tax by recontributing. There is an amendment to ensure that first home saver accounts which do not have a tax file number cannot be contributed to superannuation but instead remain inactive. Similarly, an amendment is being made to prohibit any first home saver accounts from being used as security for a borrowing or a payment from a first home saver account from being assigned. A provision is made to ensure that first home saver accounts holders are unable to transfer between providers in order to withdraw their money from a first home saver account using various provisions of the Corporations Act 2001 without meeting the four-year rule. A provision is made allowing APRA to seek injunctions against individuals purporting to offer first home saver accounts.

The First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 introduces a framework for imposing a supervisory levy on first home saver account providers. This levy will recover on a user-pays basis the cost of the Australian Prudential Regulation Authority prudentially supervising financial institutions that offer first home saver accounts. The proposed levy is modelled on the supervisory levy for retirement savings account providers and will be administered as part of the existing financial institutions supervisory levy framework also applying to authorised deposit-taking institutions, general and life insurers and superannuation funds. The financial institutions supervisory levies are set annually by the Treasurer.

The major stakeholders are broadly supportive of the first home saver accounts. If anyone had been listening to the contribution from the other side, they might not have known that the coalition are also broadly supportive of this legislation. It would be refreshing if they actually came to this chamber and spoke positively about the legislation that they intend to support rather than continually attacking the Rudd Labor government for its tremendous initiative that is only going to benefit those trying to save for their first deposit.

During consultation on the initial set of legislation, concerns were raised about some of the features of the accounts. Some ADIs did not support the model to tax first home saver accounts in a manner similar to retirement savings accounts. Amendments being made by the First Home Saver Accounts (Further Provisions) Bill 2008 provide greater certainty for ADIs as to how first home saver accounts will be taxed. Superannuation trustees were concerned about the requirement to use a separate trust from their current superannuation trust to offer first home saver accounts. Comments during targeted confidential consultation on the current set of legislation were minimal, reflecting the relatively mechanical nature of the changes proposed.

Let us look at the key features of this initiative. The government will provide a 17 per cent matching contribution on personal contributions up to $5,000 a year—that is, an annual maximum of $850. Account holders must save for part of four financial years—that is, the minimum period can be two years and two days if an account is opened on 30 June. The maximum contribution limit is $75,000; interest can exceed this amount. Account holders contribute from after-tax salary. Government contributions and withdrawals are not taxed, and earnings in the account are taxed at 15 per cent, like superannuation. Accounts can be provided by banks, superannuation funds, building societies, life offices and credit unions.

I remind the House that, over the first three years, first home saver accounts will help around half a million first home buyers save a bigger deposit by establishing superannuation-style low-tax savings accounts. These accounts will help boost national savings and therefore help to fight inflation, with the accounts anticipated to hold around $3.5 billion in savings after three years. Some indicators suggest that home loan affordability in Australia is currently at a record low. There are also predictions that home loan affordability will decline still further in the immediate future in response to the record high inflation that the Rudd government inherited.

The proportion of median family income required to meet average home loan repayments across Australia increased by more than eight per cent over the last 12 months. A similar increase has been seen in the proportion of median family income required to pay weekly rent for a home. I have heard firsthand many stories of struggles with housing affordability in my electorate on the Central Coast. While the home-building rate has slowed in the region, the demand for housing has remained steady. The gap in supply and demand has grown wider. Coupled with that is the fact that so many of my constituents have to travel major distances to their jobs in Sydney and Newcastle, adding higher costs to their weekly budgets and therefore further pressures to their lives. Of course, the task of saving for a home deposit will be that much more difficult for these people, but the incentive to do so is being provided under the new First Home Saver Accounts legislation. In this context of declining home loans and rental affordability and higher house prices, many would-be first home buyers are experiencing difficulty in saving a deposit. This is partly reflected in the declining rate of first home buyer participation in the housing market.

One of the greatest obstacles to buying a first home is saving that first deposit. This Rudd government initiative, the first home saver account, will allow a couple—each on an average wage and saving 10 per cent of their income—to save a deposit of around $64,000 over five years. This $64,000 deposit is around $14,500, or 30 per cent, more than could be achieved by saving through an ordinary deposit account. This is a great initiative. A 30 per cent increase in the deposit that young couples are going to be able to make so that they can enter the housing market is a concrete step that makes the Australian dream of owning your first home that much easier. A larger deposit will also reduce the debt burden for young homebuyers and can help them avoid the often costly mortgage insurance that comes when you are buying that first house and your deposit is smaller than you probably want.

The new first home saver accounts will build on the arrangements for superannuation, allowing potential first home buyers to access similar tax breaks on their first home savings and unlock higher returns. May I present two scenarios which show what can be achieved through the first home saver account. Under the first scenario, where the saver merely meets a target of achieving the maximum government contribution each year, the individual will have around $28,200 in August 2012 to contribute to a house purchase. Of this amount, $21,750, or 77 per cent, will have been saved by the individual and nearly $3,400, or 12 per cent, will have been earned in interest, and the net contribution of government will be around $3,080, or around 11 per cent. If the First Home Saver Account scheme were not in place, and the savings were the same, this individual would be around $4,340 worse off due to lower after-tax interest earnings and no government contributions.

Under the second scenario, where the saver meets a target of achieving the maximum government contribution each year and invests in order to ensure the account value is at the maximum threshold by 1 January 2013, the individual will have around $80,500 in August 2012 to contribute to a house purchase. Of this amount, $64,250, 80 per cent, will have been saved by the individual, with around $43,750 needing to be deposited when the first home saver account is first opened. Nearly $14,900, which is around 18 per cent, will have been earned in interest and the net contribution of government will be around $1,403. If the First Home Saver Account scheme were not in place and the saving levels were the same, this individual would be around $6,130 worse off due to lower after-tax interest earnings and no government contributions.

Savings with Labor’s first home saver accounts will receive preferential tax treatment in two ways compared to ordinary savings accounts: savers will be eligible for a low tax rate of 15 per cent on the first $5,000 of income they deposit in their account each year, rather than the ordinary tax rate they would pay, and interest earned will be taxed at 15 per cent or less. In an ordinary savings account, both contributions and interest earned on savings are taxed at the individual’s relevant income tax rate. As a result, the tax benefit provided by the first home saver account will enable most first home buyers to save substantially more than they would have otherwise. In addition to the first $5,000 in tax preferred contributions, $5,000 a year may be contributed towards a first home saver account from after-tax income without any further tax having to be paid on that contribution.

This is a great announcement; this is great legislation that goes in a very meaningful way to making housing affordability a reality for many, many young couples. While the Liberal Party’s inflation legacy has made it harder for working families, especially first home buyers, to save a deposit and buy themselves a home, the government’s measures and policies are showing our commitment to families and couples who are trying to live the dream of owning a home. The first home saver accounts deliver and improve on a key election commitment and bring the dream of homeownership a step closer to reality for hundreds of thousands of Australians while still assisting in the fight against inflation. I commend both bills to the House.

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