What the latest budget mean for sellers and buyers
The Australian Federal Budget was handed down in May, and while some media outlets labelled it “unexciting”, there were some announcements related to housing.
Before we share the details, from an individual and home owner perspective, perhaps the best updates come in the form of the energy rebate and tax cuts:
Energy rebate
Firstly, every household in Australia will have their energy bills reduced by $300 under a $3.5 billion cost-of-living package. Every home is eligible, and the discount will automatically be added to energy bills from July.
Tax cuts
Most Australians will enjoy tax cuts from the first of July as well.
The Government will:
– Change the 19 per cent tax rate to 16 per cent
– Change the 32.5 per cent tax rate to 30 per cent
– Increase the income threshold above which the 37 per cent tax rate applies from $120,000 to $135,000
– Increase the income threshold above which the 45 per cent tax rate applies from $180,000 to $190,000.
The amount of tax you pay changes the more you earn. You can try a tax calculator to see how much extra money you will take home. Someone on $120,000 for example, will save $2,679 as part of the initiative.
Budget news for home buyers, sellers and renters
The budget didn’t have a great deal to change the way we buy and sell homes, however it did leave current policies around negative gearing unchanged. This means investors won’t face extra financial pressure as they try to maintain their assets.
Schemes including the First Home Guarantee, Regional First Home Guarantee, and Family Home Guarantee are also unchanged.
The biggest budget announcements in terms of housing relate to $6.2 billion worth of specific housing initiatives. For example, the Government has pledged to make a further $1 billion available to states and territories to deliver new housing – including for connecting essential services such as water, power, sewerage and roads.
Meanwhile, the first $500 million of the $10 billion Housing Australia Future Fund will be disbursed in 2024-25. The government aims to use this fund to build 1.2 million homes over the next five years. This will combat the current record lows when it comes to new homes being approved and completed. It is these lows that are contributing to still-high prices as buyers compete to secure their slice of the property market.
Some renters will feel relief as well; a $1.9 billion investment will increase the maximum rates of Commonwealth Rent Assistance by 10 per cent, to alleviate rental stress. The Government stated that “nearly 1 million households receiving the maximum rate of Commonwealth Rent Assistance, around one quarter of all renters, will be better off” as part of this initiative.
To further support renters, foreign investors will be able to purchase established Build to Rent developments with a lower foreign investment fee, conditional on the property continuing to be operated as a Build to Rent development.
An indirect benefit to buyers who are feeling the stress of high prices is $88.8 million for new fee‑free TAFE places. This includes increased access to pre‑apprenticeship programs in courses relevant to the construction sector, and should help to reduce labour shortages in the industry.
What does this mean?
Most home buyers and sellers won’t notice a significant financial impact as a result of this Federal Budget. While the Government is funding housing initiatives, it is also working to reduce labour shortages through migration. Some have pointed out that this is solving one problem to create another.
Currently, Australia’s housing supply is below the OECD average, behind Canada, the US and the UK. It will take time to close the gap between supply and demand, which means homeowners and investors are still set to achieve healthy returns over the coming years.
While demand outstrips supply, it’s an excellent time to sell, particularly if you are downsizing. Reach out to start working on a strategy today.
