Wednesday night, Federal Treasurer Josh Frydenberg delivered the 2020-21 Federal Budget. The focus was aimed squarely at jobs creation and boosting economic activity to help drive Australia out of the Coronavirus recession. It includes a number of tax cuts, backdated to the start of this financial year and said to benefit more than 11 million Australians. Initially expected in May with a focus on bringing the nation into surplus, this year’s budget saw the announcement of a record deficit of $213 billion in 2020, $112 billion in 2021 and $87 billion in 2022.
Tax cuts – The government will bring forward the income tax cuts for most income brackets that were scheduled for 2022. The low and middle income tax offset of $1,080 will remain in place for the 2020/2021 financial year.
Jobs – The government intends to grow the economy in 2021/2022 by creating job opportunities in sectors such as manufacturing, infrastructure, medicine, recycling, food, defence, farming and tourism. There will also be a focus on increasing female workforce participation.
Health – With a focus on vulnerable Australians, the government announced that there will be additional funding for the National Disability Insurance Scheme, mental health and suicide prevention, as well as the Pharmaceutical Benefit Scheme.
Super – By July 2021 MySuper products will need to do an annual performance test and notify members each year if their fund underperformed. The government will also release an online comparison tool called YourSuper that will help members compare the fees and returns for super funds. The ATO will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal.
Age pension and welfare recipients – People who are currently receiving certain eligible income support payments and concession card holders, including those on the age or disability support pension and those who receive carer payments/allowances or a disability support pension will receive two additional payments of $250 ($500 in total), to be paid in December 2020 and March 2021.
Property Specific highlights
First Home Loan Deposit Scheme extended – The First Home Loan Deposit Scheme (FHLDS) has been extended (backdated to 6 October 2020) to offer an extra 10,000 places under the scheme until 30 June 2021 to support the purchase of a new home or newly built home. The scheme was introduced at the start of 2020 and saw a rapid uptake. The scheme has so far helped almost 20,000 first home buyers secure a home with a deposit as low as 5% without having to pay lender’s mortgage insurance.
Low cost finance for affordable housing – Mr Frydenberg said the government will enable an additional $1 billion of low cost finance to support the construction of affordable housing, taking the total concessional finance made available to community housing providers to $3 billion.
Granny Flat Capital Gains Tax Exemption – The government will provide a targeted Capital Gains Tax (CGT) exemption for granny flat arrangements with a formal written agreement in place. The exemption will apply for arrangements with older Australians or those with a disability. The change will not apply to commercial rental arrangements. Around 3.9 million pensioners and 4 million people with a disability would be eligible for this exemption. This measure will start from 1 July 2021 if the legislation is passed.
Indigenous Home Ownership Program – The government said it will invest $150 million into the Indigenous Home Ownership Program to construct new homes in regional areas, which in turn will create more jobs and help many indigenous families own their own home.
Note: It is important to be aware that the Budget announcements are still only proposed at this stage and need to be legislated.
Click here for all the details with a focus on key property takeaways and here for a rundown of the winners and losers of this year’s budget.