Angus Raine Executive Chairman, Raine & Horne has welcomed the 2020-21 Federal Budget, which has responded to the COVID-19 pandemic and provided an encouraging outlook for the Australian property market.
“The Prime Minister, Scott Morrison has described this Budget as the most important since World War II,” Angus said. “Consequently, the Government is spending big on regional infrastructure, job creation, asset write-offs and personal tax cuts, which are all initiatives that will help the real estate industry directly and indirectly,” said Angus.
The announcements that will directly impact the real estate industry include the removal of CGT currently paid on the value of a home with a granny flat. At the same time, the Treasurer also confirmed an earlier government commitment to extend the First Home Loan Deposit Scheme into 2021, with 10,000 extra places reserved for first-home buyers choosing new builds.
It is estimated this measure will generate $800 million for the economy by stimulating housing construction activity. Successful applicants can buy a home on a deposit as low as 5% without paying hefty lenders’ mortgage insurance, with the government’s National Housing Finance and Investment Corporation guaranteeing up to 15% of the loan. Almost 20,000 Australians have accessed the scheme since it started in January.
Angus Raine, however, cautioned that Budget 2020 was an opportunity lost in helping more Australian’s into their first and last homes. “The First Home Buyer Deposit Scheme should be extended to all eligible buyers of all homes, not just new builds,” he said. “I’d also like to see some incentives to help encourage older homeowners to downsize into smaller homes to help address supply and affordability issues in the Australian housing market.”
Tax breaks for individuals
The Government will backdate the “stage two” tax cuts that were due to start in July 2022 to 1 July 2020. This announcement means that:
There will also be individual concessions backdated from 1 July 2020 including an increase in the low-income tax offset from $445 to $700, while low and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle-income tax offset.
Angus, said, “Backdating Stage 2 tax cuts and fast forwarding them will improve borrowing capacity at a time when interest rates are at historic lows.”
Tax incentives for business
Treasurer Josh Freudenberg told Parliament that eight out of every ten jobs in Australia were in the private sector, and now over 99% of businesses will be able to write off the full value of any eligible asset they purchase for their business.
This tax incentive will be available for small, medium and larger businesses with a turnover of up to $5 billion until June 2022.
The Treasurer said of this initiative, “It is a game-changer. It will unlock investment.
“It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.
“A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester, and a food manufacturing business will be able to expand its production line.
“This is how we will get Australians back to work.”
To complement this full expensing, the Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax that has been paid. Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.
JobMaker – employment incentives
Bosses who give a job to an unemployed young person will receive a wage subsidy at the cost of around $1.2 billion. For each eligible employee, employers will receive for up to 12 months:
To be eligible, the employee must have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one of the previous three months at the time of hiring.
“The Australian Government’s focus on creating employment and generating reemployment through various Budget measures is welcomed and is good news for tenants, investors, homeowners and those wishing to sell,” said the REIA’s Adrian Kelly.
Infrastructure investment to support growth of regional Australia
Angus Raine also welcomed the investment in Australia’s regional infrastructure announced in the Budget. “The Government’s $110 billion transport infrastructure program and $3.5 billion rolling water infrastructure fund is great news for regional communities, their economies and real estate markets at a time when more city dwellers are seeking a move to regional Australia.”
Some of the critical regional transport infrastructure projects include:
The Government will provide $327.5 million to support projects under the new Perth City Deal, noted Angus Raine. This funding will be used to reactivate and revitalise the Perth CBD so that more people can live, work, learn and play in the city centre, according to Michael McCormack , Deputy Prime Minister, Minister for Infrastructure, Transport and Regional Development.
The Perth City Deal is expected to deliver almost 10,000 jobs over the next 10 years. Angus Raine commented, “This is great news for the Perth property market that is already demonstrating a strong rebound as the mining sector continues to pick up steam.”
He summed up: “Any incentives that help keep people in jobs or creates jobs will be a fantastic ‘insurance policy’ for the Australian property market as we head into the post-COVID world.”