Push for ‘key workers’ to receive tax deductions for home loan costs

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on April 08, 2019
Push for ‘key workers’ to receive tax deductions for home loan costs

Photo by Denise Jans on Unsplash

A new report has called for the associated costs of buying a home to be tax deductible for key workers such as teachers, nurses and paramedics in Sydney and Melbourne.

Commissioned by Teachers Mutual Bank and Genworth Mortgage Insurance Australia, PwC’s The Deposit Gap Dilemma report said the Federal Government could allow such workers with a less than 20% deposit (over 80% LVR) to deduct the costs of buying an owner-occupier home.

These expenses could include lenders mortgage insurance, conveyancing costs, loan application fees and inspection costs.

Such tax deductibility policies are currently only available for property investors.

The report suggests these tax breaks be made available for “key workers” in healthcare, teaching and emergency services industries, who feel they’re being priced out of Australia’s two largest cities.

“We are potentially looking at a drain of key workers from Australia’s two largest cities, when demand for their services is growing and at a time when 57% of the general public believe a shortage already exists,” said Steve James, CEO of Teachers Mutual Bank.

“If our key workers can’t find homes, our cities can’t function.”

The report found that 79% of these key workers believe home ownership is not achievable for them and as a result, almost one in four are looking to either relocate away from those cities or change careers altogether.

According to the report, the Government could consider extending the property investor tax deductions to key workers in Sydney and Melbourne looking to buy a home, “to encourage them to remain in these cities, where demand for their services is greatest”.

PWC’s estimates found such a policy would cost the Federal Government $63 million in tax revenue if supported.

These comments from Teachers Mutual Bank and PWC come despite recent analysis from CoreLogic showing sharp declines in these cities median dwelling values.

“Although house prices in Sydney and Melbourne have dropped by 12.3% and 8.7% from their respective 2017 peaks, the barriers to housing affordability for key workers are entrenched, and not significantly alleviated by price depreciation in this range,” PwC reported.

According to PwC’s analysis, a 50%-60% decline in housing prices is needed before key workers can contemplate buying a home ‘within reasonable reach’.

(The latest data from CoreLogic’s March report shows these falls are now actually 13.9% and 10.7% respectively).

CityMonthly changeQuarterly changeAnnual changeMedian value
Sydney -0.9% -3.2% -10.9% $782,473
Melbourne -0.8% -3.4% -9.8% $624,425
Brisbane -0.6% -1.1% -1.3% $489,832
Adelaide -0.4% -0.5% 0.8% $426,990
Perth -0.4% -2.9% -7.7% $442,716
Hobart 0.6% 1.2% 6.0% $464,168
Darwin -0.6% -3.9% -6.8% $400,316
Canberra 0% 0% 3.1% $595,212
Combined capitals -0.7% -2.7% -8.2% $597,860
Combined regional -0.4% -1.0% -2.1% $376,728
National -0.6% -2.3% -6.9% $524,149

Source: CoreLogic

For feedback or queries, email will.jolly@savings.com.au

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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