Liberal’s proposed First Home Buyer Mortgage Deductibility Scheme

How will the First Home Buyer Mortgage Deductibility Scheme work?

The First Home Buyer Mortgage Deductibility Scheme will see eligible first home buyers provided with the tax deduction during the first five years of their mortgage, improving chances to get into the market sooner and incentivising new home building.

Buyers are able to deduct the interest paid on up to $650,000 of their mortgage from their assessable income. There is no price cap on how much the new build home can cost.

Example of how the First Home Buyer Mortgage Deductibility Scheme will work

Below are two examples of how the First Home Buyer Mortgage Deductibility Scheme will work:

Scenario 1: Zoe

After saving for several years, Zoe has reached her target of $70,000 and is looking to put down a deposit for a new build townhouse in suburban Geelong. Originally from the UK, Zoe is an IT engineer earning a gross annual salary of $120,000. She recently become an Australian citizen. She has never owned property either in the UK or in Australia before. Under the terms of the First Home Buyer Mortgage Deductibility Scheme, she will be able to claim a tax deduction on the first five years of mortgage interest repayments she will make on her townhouse. Zoe has pre-approval for a $650,000 mortgage at 6.1%, meaning she will save around $12,000 a year.

Scenario 2: Archie and Tom

Archie and Tom are in a de facto relationship and looking to build their first home together in Canberra. Neither of them have owned property before and both are Australian citizens. Archie works for the Department of Defense, earning $155,000 per annum before tax. Tom is a high school teacher and earns $90,000 per annum. With a combined income of $245,000, Archie and Tom qualify for the First Home Buyer Mortgage Deductibility Scheme, and will be able to claim a tax deduction on the first five years of mortgage repayments they make on their future home. 

What are the eligibility requirements for the First Home Buyer Mortgage Deductibility Scheme?

In order to be eligible for the First Home Buyer Mortgage Deductibility Scheme, the following criteria apply:

• The first home buyer must be purchasing a newly built home
• The newly built home must be the first home buyer’s principal place of residence
• Meet the income limits specified

Income limits

The first home buyer must be earning no more than $175,000 per annum, while couples applying must have a combined income under $250,000

When does the scheme start?

No official start date for the First Home Buyer Mortgage Deductibility Scheme has been announced. The launch of the scheme is dependent on whether the Coalition win the 2025 federal election, which will take place on 3 May.

How long does the scheme last?

The Liberal Party has not yet been announced whether the First Home Buyer Mortgage Deductibility Scheme will be a temporary or permanent offering.

How long can you deduct interest payments for?

Under the outlined terms for the First Home Buyer Mortgage Deductibility Scheme, the scheme will provide a tax deduction on interest payments for the first five years of a mortgage.

Can the scheme be used with other schemes and incentives?

No details have yet been published by the Coalition on whether first home buyers who benefit from the First Home Buyer Mortgage Deductibility Scheme will still be eligible for other first home buyer assistance. Current stamp duty exemptions and First Home Owners Grant offerings first home buyers can benefit from are unique to each state and territory.