2021 federal budget - impacts to finance and property
The 2021 Federal Budget has been delivered to really springboard the economy. “Our housing measures go even further” our federal treasurer Josh Frydenberg stated in parliament yesterday to help more Australians in the housing market. Here is our quick summary of this budget, through a property and finance lens. Enjoy.
More add-backs, more income for servicing your debt
Eligible businesses with aggregated annual turnover, or total income of $5 billion or less, which is all of us reading here I think, can deduct or write off the full cost of eligible depreciable assets of any value. The asset must be acquired from 6 October 2020 and first used or installed ready to use by 30 June 2023 - if your business earns more than $5 billion you're not eligible, sorry, not sorry.
The banks let self-employed borrowers add back these deductions to profit. This means you have more income available to go towards servicing your debt. This expense is an instant deduction to how much you have to pay tax on which is a win if you're trying to lower tax for a financial year, and then the banks won't sting you for it by saying you have less income available given they will let you add it back to profit. You just need to be wary of which banks can add back this written-off asset given your industry and what portion of this deductible expense i.e a motor vehicle purchase amount, can be added back to profit, some banks only add back a portion of the depreciation.
Downsizers can contribute significantly more to super
If you’re aged 60 to 65 and you downsize by selling your home, the downsizer contribution will allow people to make a once-off, post-tax contribution to their superannuation of up to $300,000 per person or $600,000 per couple from the sale proceeds of their home. Not their investment property sale though. This doesn’t count towards non-concessional contribution caps either. This should free up properties of larger homes for younger families to come through and buy them - this is the aim of this initiative nevertheless.
Extending the First Home Super Saver Scheme
You can now access up to $50,000 of your super fund to be used for a deposit on a home. This is up from $30,000 in total, or $15,000 per year, from when it was originally introduced in the 2017-2018 budget. This will benefits individuals by about a 15% tax saving on money being channeled out of their super for a first home purchase. You just need to be over the age of 18 and not have owned property in Australia before.
On this initiative though, accessing this super is the hard part. We’ve had clients struggle. When data entering your application, you need to make sure you get the tax withheld, your personal details and everything absolutely correct. There are no real specific sets of guidelines or instructions on it available so you do need to hop on the phone, make a bit of noise and hopefully, the squeaky wheel gets the oil. They don’t actually have a system that tracks or tells you where you're application is at. So you need to be onto them to make sure you get your money released, especially if you require it for a settlement.
Extending New Home Guarantee
This scheme is being extended for first home buyers, with another 10,000 places added to meet demand. This scheme allows first home buyers to build a new home or purchase a newly built home with only a 5% deposit and without needing to pay lenders mortgage insurance (LMI) as the government will cover or guarantee it. This does mean though that for existing properties, there’s no additional guarantee support - that's been stopped.
Single parents can now buy a home with only a 2% deposit
10,000 spots are available as part of the new Family Home Guarantee, for eligible single parents with dependants to build a new home or purchase an existing home with a deposit of as little as 2%. So this is for both new and existing, and not limited to first home buyers. Applicants must be Australian citizens, aged over 18 and have an annual taxable income of no more than $125,000.
Final thoughts
Keeping an eye on how these federal budget initiatives play out will be interesting. Actually keeping up with all of them is tricky - there are so many first homeowner guarantees or grants to stay on top of. With the current low rates, this additional budget support on top of the existing initiatives, and confidence fuelling the economy, it makes sense that the property market should continue to be buoyant. We will be continuing to watch all this closely nevertheless.
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