At the beginning of October, the Federal Government released the budget for 2020-21. The latest federal budget aims to boost economic activity and create jobs in light of the COVID-19 pandemic and recession.
As part of the federal budget, the government has introduced several measures for home buyers and SMBs, as well as numerous tax cuts and spending initiatives.
So what does this mean for you? We break down the main initiatives related to the property market and business owners below.
“The budget will confirm the strong plan we have to recover from the COVID-19 recession and to build our economy for the future. To cushion the blow of the pandemic recession. To recover what’s been lost – the jobs, the livelihoods, the hours, the incomes, the customers, the clients.”Prime Minister Scott Morrison
Extension of the First Home Loan Deposit Scheme
The Federal Government has made an extra 10,000 spaces available under the First Home Loan Deposit Scheme (FHLDS), specifically for eligible first home buyers purchasing new homes.
The New Home Guarantee is designed to support the Government’s economic stimulus measures, while also creating jobs in the residential construction sector. Read more about the NHG here.
“Building on the success of the existing scheme, an additional 10,000 first home buyers will be able to obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5 per cent.”Federal Treasurer Josh Frydenberg
In addition to NHG, the government will also be:
- Enabling an additional $1 billion in low-cost finance to support affordable housing construction
- Investing $150 million over three years in the Indigenous Home Ownership Program. This program helps to build new homes in regional areas and enable more Indigenous Australians to own their own home
Removal of Capital Gains Tax (CGT) for granny flats
Granny flats are becoming increasingly popular, particularly in NSW. As Australia’s population ages and demand grows for affordable lone-person housing options, more Australians are opting to add granny flats to their existing property.
As part of the federal budget, the Government has committed to a capital gains tax (CGT) exemption for granny flat arrangements with a formal written agreement in place.
The hope is that this measure will:
- Drive the creation of more accommodation for older Australians or people with disabilities
- Boosting jobs in the construction industry by stimulating demand for new housing
- Reducing risks of financial abuse and exploitation of granny flats
The Federal Government estimates that 3.9 million pensioners and 4 million Australians living with a disability would be eligible for the CGT exemption. If the legislation is passed, the exemption measure is expected to start from 1 July 2021.
Note: this change will not apply to commercial rental arrangements for granny flats.
Additional support and business write-offs for SMBs
SMBs have been some of the hardest hit by the COVID-19 pandemic. To jumpstart the economy and support small business owners, the federal budget plans to introduce a temporary tax incentive for 3.5 million businesses that employ over 11.5 million workers.
The government has launched the following as part of the incentive:
- Depreciable asset deduction. Businesses with turnover up to $5 billion can deduct the full cost of eligible depreciable assets of any value in the year they are installed. This includes the cost of improvements to existing eligible depreciable assets. The incentive is available from now until 30 June 2022.
- Offset of losses. Companies with a turnover up to $5 billion can offset losses against previous profits on which tax has been paid to generate a refund. Any losses incurred up to 2021‑22 can be carried back against profits a business made in or after 2018‑19. Those that are eligible can opt to receive this refund when lodging their 2020-21 or 2021-22 tax return.
- Lifting the aggregated annual turnover threshold for small-business tax concessions. The government is providing $105 million in tax relief for SMBs, in order to expand access to a range of small-business tax concessions, reduce red tape, and support businesses to attract workers and retain jobs. Businesses with an aggregated annual turnover between $10 million and $50 million will now be able to access up to 10 small-business tax concessions. This will apply in three phases starting from 1 July 2020.
- JobMaker hiring credit. Eligible employers can claim $200 a week for each additional eligible employee they hire that is aged between 16 and 29 years old, and $100/week for additional eligible employees hired aged between 30 and 35 years old. Businesses will benefit from the JobMaker hiring credit for up to 12 months from the date that the new position is created. Read the full factsheet here.
“From tonight, over 99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business…It is a game changer. It will unlock investment. It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.”Federal Treasurer Josh Frydenberg