Federal Budget 2021
What the Federal Budget means for property buyers and sellers
When Federal Treasurer Josh Frydenberg delivered the 2021–22 budget last Tuesday, we were keeping our eyes and ears out for announcements that might have an impact on the property market. Typically, budgets contain measures that impact buyers, sellers, investors and downsizers. And this year was no different.
Saving for a 10% deposit (or higher) is seen as the biggest impediment to home ownership. Once people have a foothold in the property market, they tend to build wealth over their lifetime. The government recognises this, and the budget delivered mostly good news for people looking to enter the real estate market, with several measures either directly or indirectly addressing the so-called “deposit hurdle”. There’s also some good news for people approaching retirement age.
Here we outline the four most important property-related budget measures, and explain what it means for those affected.
While the tax cuts announced in the budget aren’t specifically aimed at the housing market, one result is that some people saving for a deposit or paying off a mortgage will have more available cash.
The announced cuts will apply to more than 10 million people, and the projection is that low- and middle-income earners will benefit by up to $1,080 for individuals or $2,160 for couples each year. The stated aim of these cuts is to increase personal spending to assist small businesses and create jobs, but many people are likely to put the extra money towards their deposit or home loan.
For a couple that qualify for the maximum cut, the extra $180 a month could make a real difference. On an average mortgage of $500,000, it has the same impact as a 0.6% interest rate cut (based on a variable rate of 3.85%). Please note, this is for information purposes only, we are not qualified to provide tax advice.
Family Home Guarantee
This was the announcement that attracted the most attention for property watchers. With a two-pronged aim of addressing the very real “deposit hurdle” and the LNP’s well-publicised recent issues affecting women, the Family Home Guarantee (FHLDS, also known as the New Homes Guarantee) will make it easier for single parents (80% of which are women) to break into the housing market.
Starting on 1 July 2021 and running for four years, the scheme plans to provide a total of 10,000 single-parent families the ability to buy a home with just a 2% deposit. The government will guarantee up to 18% of the purchase price. This has an added advantage: with a total 20% deposit lenders won’t require borrowers to take out mortgage insurance.
While this is a good scheme, keep in mind that it equates to only 2,500 recipients per year. There are 1 million single-parent families in Australia, and although not all need this assistance, it will still be incredibly competitive. Lenders will scrutinise applicants’ capacity to service any loan. Just having a 2% deposit saved is unlikely to be enough to qualify.
Mortgage Broker Melbourne can help single parents with dependants with ideas for getting finances in the best possible shape to qualify for this scheme.
First Home Super Saver Scheme
In addition to payments by employers, people can make extra payments into their super fund. This contribution isn’t taxed. The amount you can tip into your super is indexed, and is currently $27,500 per year.
Since 2018, individuals have been able to access up to $30,000 of this tax-exempt voluntary superannuation contribution under the First Home Super Saver Scheme, known as the FHSS. Couples can therefore access $60,000.
In this year’s budget, the amount has been increased to $50,000. So if people have made voluntary deposits into their super over the years, they can access up to $50,000 of it to put towards a deposit. (Again, please seek the advice of a suitable industry professional regarding tax advice for your specific circumstances).
Good news for downsizers … and the rest of us
In a related scheme, people aged over 65 have previously been able to plonk $300,000 from the sale of their family home straight into super, avoiding a potentially big tax bill.
Treasurer Frydenberg has reduced this age limit to 60 years, meaning more people now have a financial incentive to downsize, selling the family home and buying smaller units, townhouses or apartments.
While that’s good for older homeowners, it should also have a flow-on effect, increasing the volume of family homes on the market. Younger families, including first homebuyers, will hopefully benefit from this increase in the supply of existing homes.
Talk to us
With some of the budget measures aimed at lower-income and disadvantaged Australians, care is needed when planning to purchase a property. At Mortgage Broker Melbourne, we adhere to the Best Interest Duty obligation to act only in the best interests of our clients. Our services are available free for our clients, and we take every person’s financial and life situation into account while sourcing the best home loan product we can.
Please contact us if you’d like to know more about these budget measures, and how we can help in your search for a new home.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!