Interest deduction plan for new builds aimed at easing early loan repayment pressure
The Coalition has confirmed its proposed mortgage interest tax deduction for first-home buyers will cost $1.2 billion over four years, releasing the budget impact just days before Australians head to the polls.
Under the First Home Buyer Mortgage Deductibility Scheme, individuals purchasing newly built homes will be able to deduct interest payments from their taxable income for the first five years of their mortgage, provided they meet eligibility criteria. The policy was first outlined last month.
Budget documents show a modest $7 million has been allocated to the scheme in the 2025–26 financial year. That figure is forecast to rise sharply to $132 million in 2026–27, with a further $402 million expected to be spent in 2027–28. The cost is projected to peak at $710 million in 2028–29.
Shadow treasurer Angus Taylor (pictured above) said the Coalition was focused on keeping the federal budget in check. “There is no more important time for responsible budget management than now,” he said.
“A Dutton Coalition government’s plan to get Australia bank on track will deliver lower inflation, cheaper energy, affordable homes and safer communities. The Coalition will deliver an almost $14 billion improvement to the budget bottom line over the four years to 2028-29.”
Mortgage & Finance Association of Australia chief executive Anja Pannek said the proposed deduction could provide valuable support in the early stages of homeownership. “It could help with cash flow in the critical early years of a loan,” she said.
Both major parties have unveiled housing-related policies ahead of Saturday’s election. Labor has proposed expanding the Home Guarantee Scheme to allow all first-home buyers to access it with just a 5% deposit. The party also plans to invest $10 billion to build up to 100,000 homes for first-home buyers.
The Coalition, on the other hand, also intends to adjust eligibility thresholds under the Home Guarantee Scheme, increasing both income and property value limits. In addition, the party promises to remove the current cap on the number of places available under the First Home Buyer and Regional First Home Buyer Guarantees.
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