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Liberal Party’s New Tax Deduction Plan: What It Means for First Home Buyers with a $650K Loan




If elected, the Liberal Party plans to introduce a major tax break for first home buyers: the ability to deduct the interest on up to $650,000 of their mortgage for the first five years.

This policy is aimed at easing the financial pressure on new buyers, especially as interest rates remain high and housing affordability continues to bite.


Example: What This Could Mean for You


Let’s say you take out a $650,000 principal and interest loan on a 30-year term at a 5.7% interest rate.


  • Total interest paid in the first year: around $36,705

  • If you're in the 32.5% tax bracket: your tax refund could be about $11,928

  • Effective interest cost after refund: closer to $24,777


That’s a serious saving in year one, and over five years, this tax deductibility could total more than $55,000 in refunds, depending on income and rate changes.


Why the Liberal Party Says It Matters


  • The policy is only available for newly built homes, which is meant to push construction and increase housing supply.

  • The aim is to help younger and lower-income Australians build equity sooner by making the early years of their mortgage more affordable.


What This Could Do to the Property Market


There are a few likely impacts:


  1. Boost in first home buyer activity – More people may jump in earlier, knowing they can deduct a large portion of their interest.

  2. Increased demand for new builds – Builders may benefit from a wave of demand, especially in growth corridors.

  3. Upward pressure on prices – If supply doesn’t keep up, prices for new homes could climb.


Bottom Line


This policy could change the game for many first-time buyers. A nearly $12,000 refund in year one takes a real chunk out of your financial burden. Over five years, the cumulative savings could help cover stamp duty, furnish the home, or build up a safety buffer.

If you'd like this repackaged for social media, a client handout, or with graphs showing repayment breakdowns, just say the word.

 

 
 
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