5 budget initiatives that will impact mortgage brokers and their clients

Mark Haron, Executive Director

In Treasurer Josh Frydenberg’s 2020-2021 budget there is solid investment in business and tax cuts will be brought forward. I can see plenty of opportunity for mortgage brokers and their clients.

Businesses and taxpayers are the winners in this budget. The additional income in taxpayers’ pockets will stimulate the economy, increase confidence and borrowing capacity. These measures will also have a positive impact on the housing market.

Here are the key budget initiatives that might benefit you and your clients.

Introduction of new tax cuts

The Government has brought forward personal tax cuts that were previously legislated to take effect in July 2022. As a result, the Low Income Tax Offset has increased for taxpayers earning up to $45,000 a year. Top tax thresholds have also risen – with the 19% tax rate now at $45,000 and 32.5% tax rate at $120,000. These changes will effectively put more money in the pockets of Australian workers, placing them in a better financial position to buy homes or invest in property.

Subsidies for business owners

Australian businesses are the real winners of the 2020 Budget, with a number of new measures aimed at giving them a cash flow boost. The instant asset write-off allows businesses with annual turnover of less than $5 billion to make a full deduction on the value of any new assets they purchase, while other tax concessions have been expanded to include many more businesses. The Government is also introducing the JobMaker Hiring Credit, paying employers up to $200 a week to hire young people who are currently out of work. These initiatives will enable business owners to feel more secure about their financial futures – and more willing to take on mortgages.

Expansion of the First Home Loan Deposit scheme

More Australians will be able to get their foot in the door of the property market, thanks to an expansion of the First Home Loan Deposit scheme under the new Budget. In 2020 and 2021, an additional 10,000 first-time buyers will be able to purchase newly built homes with only a 5% deposit – with the Government guaranteeing up to 15% of the loan. Complementing the $25,000 cashback announced in June for first homebuyers, this initiative will provide a much-needed boost to home loans for the coming year[LS1] .

CGT exemption for granny flats

The Government will provide a capital gains tax (CGT) exemption for granny flats as long as there is a written arrangement in place. This is great news for many older and disabled Australians who are able to maintain their independence while living close to a relative. By removing the tax penalty, these changes will encourage families to formalise their granny flat arrangements, minimising some of the risks associated with financial abuse, exploitation, or relationship breakdown.

Greater support for affordable housing

A major focus of the 2020 Budget is injecting cash into regional areas – including $150 million earmarked for the Indigenous Home Ownership Program. This investment will be used by Indigenous Business Australia as equity to deliver 360 home loans across regional Australia. The Budget also contains $1 billion in low-cost finance to support the construction of affordable housing that aims to put more Australians in their own homes.