The Coalition has unveiled a big new tax incentive aimed at easing the home ownership burden for Australians entering the property market, igniting a fierce political clash over how best to tackle the country’s deepening housing affordability crisis.
In a centrepiece announcement at the Liberal Party’s campaign launch in Western Sydney, Opposition Leader Peter Dutton promised to allow first-time buyers of newly built homes to deduct mortgage interest payments from their taxable income for up to five years—a policy never before seen in Australia’s tax framework.
Under the proposal, buyers would be able to claim deductions on interest payments for the first $650,000 of a mortgage, potentially delivering annual tax savings of around $11,000 for a typical household. Over five years, the benefit could total $55,000. Coalition estimates put the scheme’s initial budget impact at $1.25 billion.
“This is about restoring the great Australian dream,” Dutton told supporters. “I will be a prime minister who puts home ownership back within reach of working families.”
Dubbed the first home buyers mortgage deduction scheme, the initiative is specifically targeted at boosting supply, with eligibility confined to new-build dwellings. Singles earning up to $175,000 and couples with a combined income of up to $250,000 would qualify. Importantly, participants must reside in the property, though income increases post-purchase will not affect ongoing access.
Shadow Housing Minister Michael Sukkar said the measure was designed to drive construction activity by incentivising early commitment to new developments. “In Australia, you only get a new house built if someone is prepared to commit,” Sukkar said. “The way you unlock supply is by encouraging that commitment up front.”
The policy has stirred debate among economists and tax analysts, some of whom have warned of potential long-term implications. In jurisdictions where similar deductions are offered, governments often offset the concession by taxing capital gains on property sales—something Australia currently avoids on primary residences.
The Coalition’s announcement comes in direct competition with Labor’s own housing package, which Prime Minister Anthony Albanese will promote at Labor’s campaign launch in Perth. The government is proposing to broaden access to its 5 per cent deposit scheme, removing income thresholds and participation caps, while also promising to build 100,000 homes exclusively for first home buyers over the next eight years via a $10 billion fund.
Housing Minister Clare O’Neil dismissed the Opposition’s plan as reactive and questioned its broader impact. “We are probably talking about a pretty small segment of the market,” she said. “The real issue is that young people can’t save enough for a deposit. That’s what our policy directly addresses.”
Despite her criticism, O’Neil stopped short of rejecting the idea outright, noting that further analysis of the numbers was needed.
Dutton’s housing plan was accompanied by a separate cost-of-living measure—a one-off income tax rebate of up to $1200 to be delivered after the 2025–26 financial year. Designed to mimic the now-defunct Low and Middle Income Tax Offset, the Cost of Living Tax Offset will benefit around 85 per cent of the workforce, with the full amount going to those earning between $48,000 and $104,000.
For a two-income household, this could equate to a $2400 boost. The rebate is temporary, with no changes to tax brackets, allowing the Coalition to pitch it as both fiscally prudent and targeted.
“Labor’s 70¢ a day is a Band-Aid on a bullet wound,” Dutton said. “Our Cost of Living Tax Offset will put more money back into the pockets of millions of Australians at a time when they’re being crushed by skyrocketing grocery bills, rent, mortgage repayments and insurance costs.”
With pre-polling set to open from April 22 ahead of the May 3 federal election, both major parties are racing to win over voters grappling with soaring living costs and dwindling housing accessibility.
The Coalition is banking on bold, immediate relief measures to gain traction, while Labor is focusing on systemic reforms to increase affordable housing stock and assist buyers struggling to amass a deposit.
Shadow Treasurer Angus Taylor said the Coalition would release full costings before election day, arguing the tax measures were “temporary and targeted” to avoid fuelling inflation or worsening the budget’s bottom line.
As the campaign trail heats up, housing policy has emerged as a defining fault line—one that may determine not only the next government but the financial future of a generation priced out of home ownership.
