Peter Dutton has pledged a bold new policy to support first home buyers, announcing a tax deduction scheme for mortgage payments on newly built homes. Under the plan, eligible buyers could deduct mortgage payments from their income tax, potentially saving $11,000 annually, or $55,000 over five years. The proposal, detailed in a report by ABC News, would be a significant structural shift in Australia’s tax system.
Key Details of the Coalition’s Mortgage Deduction Plan
The proposed scheme would be limited to the first $650,000 of a mortgage and would apply for five years. Eligibility would be means-tested — capped at $175,000 income for singles and $250,000 for couples. The Coalition argues the measure will boost housing supply by incentivizing purchases of newly built homes, thereby stimulating new construction.
Coalition housing spokesperson Michael Sukkar described the plan as a “massive structural change” and criticized Labor’s alternative as a “lazy Clayton’s policy”. He explained that tying the tax break to new builds would help address housing shortages:
“In Australia you only get a new house built if someone is prepared to commit… the way you unlock supply is encourage someone to pre-commit to a new dwelling.”
Economists, however, may scrutinize the policy, noting that countries with similar mortgage tax deductions often recover the cost through capital gains tax when homes are sold — a mechanism not yet proposed in Australia.
Labor’s Competing Housing Strategy
The announcement sets the stage for a clear policy clash with Labor, which is expanding its plan to let first home buyers purchase with just a 5% deposit, eliminating the need for lenders’ mortgage insurance. Labor’s scheme already supports 50,000 buyers annually, and expects to grow that number to 80,000.
Housing Minister Clare O’Neil defended Labor’s plan, emphasizing affordability over tax perks:
“The housing that is being built today is not affordable for most young people… Our government will roll up its sleeves and get involved.”
She dismissed the Coalition’s announcement as “public policy on the run”, expressing doubts about its effectiveness in addressing the biggest barrier — saving for a deposit.
