Seven months overdue, the long-awaited federal budget has been delivered, setting out a much-anticipated plan for economic recovery post-COVID-19. So, what might this mean for real estate agents?
“This budget is all about jobs,” proclaimed federal Treasurer Josh Frydenberg in the House of Representatives as he unveiled details of the 2020 federal budget.
“Tonight, we embark as a nation, on the next stage of the journey.
“There is no economic recovery without a jobs recovery. There is no budget recovery without a jobs recovery.”
But such stimulus doesn’t come without a cost. The government is forecasting net debt will peak at $966 billion — or 44 per cent of gross domestic product (GDP) — by 2024.
Calling this debt “a heavy burden”, Mr Frydenberg said it is a necessary one — “to responsibly deal with the greatest challenge of our time”.
So, what does the budget have in store for real estate agents and the property industry?
Tax cuts for workers
In a bid to kickstart the economy and increase consumer spending, the government said it will bring forward stage 2 of its Personal Income Tax Plan by two years.
From 1 July 2020 (backdated):
- The low income tax offset will increase from $445 to $700
- The top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000
- The top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000
Additional targeted support will also provide additional support to low and middle-income Australians, who will receive a one-off additional benefit of up to $1,080.
More than 11 million Australians are expected to benefit from the tax cut, the Treasury has outlined, with more than 7 million individuals expected to receive $2,000 or more in tax relief for the 2020–21 income year, compared with previous years.
Tax cuts for business
Building on the recent expansion of the instant asset write-off as a stimulus measure, the federal government “will now allow 99 per cent of businesses to write off the full value of assets they purchase”.
According to Mr Frydenberg, businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7.30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022.
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 has been paid.
The Treasurer said this would provide a targeted cash flow boost for businesses country-wide.
He noted that in a normal economic environment, businesses would have to return to profit before they can use their losses; “however, these are not normal times”.
Losses incurred to June 2022 can be offset against prior profits made in or after the 2018–19 financial year.
A further $105 million in tax relief will also expand access to a range of small business tax concessions by lifting the aggregated annual turnover threshold for these concessions.
Businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to 10 small business tax concessions.
Such concessions will apply in three phases, with the first phase starting from 1 July 2020, to reduce red tape and support businesses to attract workers and retain jobs.
New first home buyer opportunities
A statement from Treasurer Josh Frydenberg outlined that the additional places would be available from today, 6 October 2020, to support the purchase of a new home or a newly built home.
The First Home Loan Deposit Scheme (FHLDS) allows eligible applicants to purchase a home (within certain price restrictions based on location) with a deposit of just 5 per cent, without paying lender’s mortgage insurance.
Originally, 10,000 places were made available in the FHLDS for the 2020–21 financial year, with all 5,000 non-major lender quota places filled within the first three months of the financial year.
The opening up of new places in the scheme does have a tighter set of requirements than the initial scheme, restricted to the building of a new home or purchase of a newly built home, which was not a requirement of the original scheme.
Mr Frydenberg said the additional guarantees will be available until 30 June 2021 “and will drive more construction and support jobs as part of our Economic Recovery Plan”.
The FHLDS can be used in conjunction with the First Home Super Saver Scheme and HomeBuilder grants, as well as relevant state and territory grants and concessions, and is expected to boost real estate transactions across the country.
More to come.