After much anticipation, the Federal Budget address was delivered by the Treasurer, Josh Frydenberg on October 6th.
The government announced a raft of big-spending items designed to kick start the economy and support job growth as we manage the impact of the COVID-19 pandemic.
In this article, I will dissect the 3 key takeaways that all investors and owner-occupiers should be informed on.
Key Impact For The Property Market
1. The Extension Of The First Home Loan Deposit Scheme (FHLDS).
Under the proposal, the FHLDS will see an additional 10,000 places available between the 6th October - 30th June 2021 - adding to the 20,000 places made available since the scheme started in January 2020.
The caveat to this is that the additional places will only be made available for construction or purchases of newly built homes [1].
To serve as further encouragement, the price thresholds attached to the scheme have been increased significantly which would serve as a further incentive to purchase new property.
Illustrated below are the updated thresholds, broken down into each state.
2. Changes To Responsible Lending Obligations.
In recent times, many borrows have struggled to secure finance due to the level of restrictive lending practices implemented by lenders in the wake of APRA intervention and the Hayne’s Royal Commission into the banking and finance sector.
While the intervention was intended to serve as a protection of those in vulnerable financial standing, it has also contributed to higher levels of red- tape which has impeded the flow of credit.
In acknowledgement of this, the government has announced that it is simplifying Australia’s credit system; shifting from "lender beware" back towards the traditional "borrower beware" approach to make the application process faster for consumers [2].
3. Income Tax Cuts.
The budget also revealed that the proposed tax relief for individuals would be brought forward in light of the current economic situation, taking effect from July 1, 2020.
The package brings forward to stage two of our Personal Income Tax Plan by two years from 1 July 2020:
The low-income tax offset will increase from $445 to $700;
The top threshold of the 19% tax bracket will increase from $37,000 to $45,000; and
The top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000
Essentially, this means that under the government’s changes, low- and middle-income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual-income families, this financial year.
It is anticipated that this will ease some of the burdens on household cashflow and also serve to bolster consumer confidence and spending [3].
Key Takeaways
Overall, the government has announced the largest investment in infrastructure spending designed to stimulate economic growth and job creation. Under this plan, several key initiatives will make it easier for Australians to purchase property.
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References [1] Budget Government Australia