The long-anticipated Federal Budget was finally released on the evening of 6 October 2020.
Delayed because of the COVID-19 pandemic, the budget has attracted more interest than usual. Industry bodies wanted to see further stimulus packages, while welfare advocates were hoping for a permanent increase in the JobSeeker rate after the Coronavirus supplements are due to expire.
But what’s in it for real estate? The budget brings wins for first home buyers and the construction industry, plus more money for higher income earners and tax write offs for business.
First home buyers
The First Home Loan Deposit Scheme has been expanded into 2021, with an extra 10,000 places reserved for first home buyers who are choosing new builds.
The Scheme allows first home buyers to buy with a 5% deposit. As the Government guarantees the other 15% to the bank, buyers don’t have to add expensive mortgage lenders’ insurance (LMI) on top. It was previously capped at 10,000 places per year. The changes mean that there are now 20,000 places as long as half of them are for new builds.
Previously, the Scheme was capped as applying only to properties priced at $600,000 or less. That’s been raised to reflect the new builds in the eastern capitals are more expensive. The new limits are $850,000 in Melbourne, $950,000 in Sydney and $650,000 in Brisbane.
There is to be no extension to the HomeBuilder Grant, disappointing the construction industry. The Grant is available for new builds or substantial renovations where the contract is signed by 31 December 2020. Building groups had hoped that the timeline would be extended, at least in Victoria, but the Budget reaffirms the original date.
The construction industry will, however, benefit from $14 billion in new and fast-tracked infrastructure projects. These include $7.5 billion in spending on road and rail projects, which may also open up new areas for housing development.
There is also $2 billion earmarked for rural communities to improve water infrastructure, making it easier for farmers and communities to support themselves.
Tax cuts and income support
The Budget also brings forward tax cuts to return more money to individuals. In the 2020-2021 financial year (backdated to 1 July), taxpayers can expect the following changes:
- The low income tax offset will increase from $445 to $700
- The low and middle income tax offset has been extended by a year, offering an offset of up to $1080
- The 19% tax bracket will apply to all income up to $45,000 (up from $37,000)
- The 32.5% tax bracket will apply to all income up to $120,000 (up from $90,000).
For people in receipt of government payments, including the Age Pension, Disability Support Pension and Family Tax Benefit, two tax-free payments of $250 each are also on offer.
However, there is no change to the current JobSeeker rate, which is due to ‘snap back’ to the ultra-low $550 per fortnight at the end of the year.
An instant asset write-off will be available to businesses with a turnover of less than $5 billion per year, which is 99% of all businesses. Businesses can now utilise an instant asset write-off for any investments made within the same financial year, instead of having to depreciate it over several years.
Businesses can also apply tax losses incurred during 19-20, 20-21 and 21-22 to offset tax paid in 18-19 or earlier financial years. This is intended to ‘smooth’ losses incurred during the COVID-19 pandemic and increase cash flow for business.
You can read the full details of the Federal Budget here.