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Here's a quick look at how this year's federal government budget incentives can help Homebuyers accumulate a deposit and enter the property market faster.
The recently announced federal budget has some great benefits for home buyers. Here’s a quick look at some incentives that could potentially help with easier access to home loans as well as boosting savings for a loan deposit.
The First Home Loan Deposit Scheme (FHLDS) Extension
Introduced by the Federal Government on January 1, 2020, FHLDS is an incentive that lets first home buyers purchase a property with just 5% deposit. Most lenders require borrowers to have 20% of the property cost to apply for a regular home loan. In case a borrower has less than 20% of the property cost for a loan deposit, lenders safeguard themselves against possible repayment default by purchasing LMI (Lender Mortgage Insurance). Lenders pass on LMI cost to borrowers by including it in the loan repayment amount leading to an increase in the overall loan cost. Under FHLDS, the federal government bears the cost of this LMI, allowing first time home buyers to make a purchase at the cost of a regular home loan with just 5% loan deposit.
When FHLDS was launched at the beginning of 2020, it had just 10,000 places for a whole fiscal year. The scheme, however, enjoyed great response resulting in all scheme places getting exhausted in a matter of months. To continue their support for first home buyers, the federal government has added 10,000 places between October 6 and June 30, 2021, taking the total number of scheme places to 20,000 since its launch in January 2020. The government has also raised the property price cap for the scheme across the nation.
Tax cuts for individuals and subsidies for business
Both incentives aim at putting cash back into pockets of employed professionals and business owners
- Personal tax cuts: Personal tax cuts slated to come into effect from July 2022 will now be applicable for the current fiscal year. The annual income for Low-Income Tax Offset has been raised to $45,000. The government has also moved the top tax rate thresholds to 19% for a yearly income of $45,000 and 32.5% for an annual income of $120,000.
- Subsidies for businesses: The government has introduced an instant asset write-off for companies with an annual turnover of less than $5 billion allowing them to make a full deduction on the value of any new assets they purchase. They’ve also launched JobMaker Hiring Credit that pays businesses up to $200 a week per employee for hiring workers aged between 24 and 35 years.
This extra money can help home buyers save for a home loan deposit faster.
Support for Affordable Housing
The government has committed to providing cheap finance for affordable housing by increasing its guarantee for the National Housing Finance and Investment Corporation (NHFIC) by $1 billion.
Created in 2018, the NHFIC disperses low cost, long-term loans to registered community housing providers. The government’s current commitment takes the total concessional finance for community housing providers to $3 billion.
Reach us to make the most of these incentives and get on the property market faster.
The information is a compilation from various sources for your benefit and should not be relied upon in lieu of appropriate professional advice.