Request An Appraisal
· Join Up
PRD  →  PRD Albury-Wodonga  →  News  →  Federal Budget 2020: We have your back Australia

Federal Budget 2020: We have your back Australia

Federal Budget 2020: We have your back Australia

From the Desk of the Chief Economist – 07 October 2020


Marked as a “the most significant Federal Budget to date”, Treasurer Josh Frydenberg handed down Federal Budget 2020 overnight on Tuesday 6th October 2020. With a clear focus on stimulating economic growth post-first and second waves of COVID-19, the Federal Government introduced a number of policies to create employment and increase household income. Federal Budget 2020 is designed to supercharge economic growth in the next six months, with a goal of returning to some stability within the next year.

How will Federal Budget 2020 impact the property market, both directly and indirectly?

Direct Impact

First home buyers are the clear winners of Federal Budget 2020, with the First Home Loan Deposit Scheme expanded. An extra 10,000 places for new homes and apartments have been allocated to the Scheme. The value of properties eligible will be increased, which makes the Scheme more in line with current property market median prices.

The Scheme’s price cap has been extended to $950,000 for Sydney, $850,000 for Melbourne, $650,000 for Brisbane, and $550,000 for other capital cities and regional centres across Australia. This will allow first home buyers to access new homes which in previous has been identified as a deterrent in comparison to established home prices.

The Federal Government did not extend the $680 million HomeBuilder Scheme, however Federal Budget 2020 papers acknowledged that HomeBuilder had brought forward housing demand, and will continue to provide support to construction activity until early 2021.

The First Home Loan Deposit Scheme runs from 6th October 2020 to 30th June 2021, and allows for first home buyers to access a home with only a 5% deposit. Combined with the HomeBuilder grant and First Home Super Save Scheme from the Federal Government; as well as other applicable State Government First Home Buyer grants and/or stamp duty exemptions; this represents an unprecedented level of government support for first home buyers and the residential construction industry.

Ahead of Federal Budget 2020 Treasure revealed the Granny Flat Tax Exemption. To be implemented as of 1st July 2021, capital gains tax will not apply to formal granny flat arrangements providing accommodation for older Australians, or people with disabilities. It will only apply to arrangements between family members, or people with other personal ties.

Investors can breathe a sigh of relief as Federal Budget 2020 has not introduced any changes to negative gearing. This is particularly crucial due to landlords facing challenges amidst COVID-19 residential rental law changes.

Indirect Impact

Federal Budget 2020 is focused on increasing household income, with a key assumption that households will spend the extra income and stimulate the economy at large. Stage 2 of the Personal Income Tax Plan has been brought forward from 2022 to this financial year and ‘turbocharged’ to backdate from 1st July.

Designed to target “middle income earners”, Stage 2 also increases the upper limit of the lowest 19% tax rate to $45,000. Thus those earning between $45,000 - $80,000 will see a $1,080 tax cut. Australians earning $90,000 will see a $1,215 tax cut, those on $100,000 will see a $1,665 tax cut, and high income earners of $120,000+ will see a $2,565 tax cut.

To date there has been a sharp rise in the household saving ratio into the June quarter 2020. Combined with increased household income there is an expectation for an unleashing of pent up consumer consumption, taking household consumption to rise by 7% in 2021-22.

Federal Budget 2020 committed to $7.5 billion on National Transport Infrastructure, which will improve business processes and human capital movement. Projects include:

  • Queensland: $750 million for stage one of the Coomera Connector project;
  • New South Wales: $560 million for Singleton Bypass on the New England Highway;
  • Victoria: $528 million for Shepparton and Warrnambool rail line upgrades;
  • South Australia: $200 million for Hahndorf township improvements;
  • Tasmania: $150 million for the Midway Point Causeway and Sorell Causeway;
  • Northern Territory: $120 million to upgrade the Carpentaria Highway;
  • Western Australia: $88 million for Reid Highway Interchange with West Swan Road; 
  • Australian Capital Territory: $88 million for the Molonglo River Bridge.

Businesses are winners, through the instant asset write-off stimulus and job-related policies such as JobMaker, JobTrainers, and $1.2 billion for apprenticeships.

Businesses with a turnover up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7.30pm (AEDT) on 6th October 2020 and first used or installed by 30th June 2020. Further, the Federal Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid. Thus, losses incurred to June 2020 can be offset againts prior profits made in or after the 2018-19 financial year. 

For real estate agencies, businesses with an aggregated annual turnover between $10 million and $50 million will have access to up to 10 small business tax concessions, including:

  • $19.2 million to encourage and support small businesses to digitise
  • $7 million to help provide business and mental health support for small business owners who are under increased financial and emotional pressure during COVID-19

The $4 billion JobMaker Hiring Credit will be payable for up to 12 months for each new job and is available to employers who hire eligible employees aged 16-35.

The Hiring Credit will be paid quarterly in arrears at the rate of $200 per week for those aged between 16-29, and $100 per week for those aged between 30-35. Eligible employees are required to work a minimum of 20 hours per week.

Moving Forward

Federal Budget 2020 has delivered a multitude of fiscal policy measures that is designed to “turbocharge” Australia’s economic recovery, hitting three key aspects: employment creation, increasing household income, and infrastructure investment to boost business processes.

The Federal Government forecasted that real Gross Domestic Product (GDP) to fall by 1.5% in 2020 and grow by 4.75% in 2021. Unemployment will peak at 8% by December 2020 and fall to 6.5% by June quarter 2022.

For those in the property market, Federal Budget 2020 papers reveal Australians still believe in the dream of homeownership and the security it brings. This is reflected through taxation receipts estimates for property income, from a -14.3% loss to a significant rebound of 13.5% in 2021-22.

Federal Budget 2020 - Tax Variation

 This shows that the Federal Government is confident in the property market; that all fiscal policies introduced in Federal Budget 2020 will directly and indirectly have a multiplier effect on the property market and will result in a surge in property demand between now and 2021-22. Already dwelling investment is forecasted to rise by 7% in 2021-22.

Popular

Latest

 Connect with us